Super fund performance continues to experience bumps along the road, with returns falling in April following a small positive return in March. Leading superannuation research house SuperRatings estimates that the median balanced option fell by 1.1% in April.

As inflation challenges become evident, the Reserve Bank of Australia increased rates for the first time since November 2010. The 25 basis point rise now sees the cash rate sitting at 0.35%.

Greater volatility has seen increased pressure on fund returns, with the financial year return for the period ending 30 April 2022 estimated to be 1.2% and further pressure emerging in May.

Kirby Rappell commented, “We have seen a significant pullback in super fund returns this financial year, with 2 months remaining. It is challenging to say whether super funds will end the financial year to 30 June 2022 in the red or the black at this stage, as it could go either way. However, we have seen funds continue to deliver above their investment objectives over the longer term which typically sit around CPI+3.0%. Sticking to a long-term strategy and blocking out short-term noise is as important as ever, with long-term performance being what really matters.

The median growth option declined by an estimated -1.5%. The fall in performance was lower for the capital stable option which invests more in defensive assets such as bonds and cash, with a decline of -0.7% estimated.

Accumulation returns to April 2022

  Monthly 1 yr 3 yrs (p.a.) 5 yrs (p.a.) 7 yrs (p.a.) 10 yrs (p.a.)
SR50 Balanced (60-76) Index -1.1% 4.2% 6.5% 6.9% 6.7% 8.2%
SR50 Capital Stable (20-40) Index -0.7% 1.0% 3.2% 3.7% 3.9% 4.9%
SR50 Growth (77-90) Index -1.5% 5.0% 7.8% 8.1% 7.6% 9.4%

Source: SuperRatings estimates

A fall in pension returns was also determined in April, with the median balanced pension option down an estimated 1.4%, similarly the median growth option fell by 1.6%, while the median capital stable option was down an estimated -0.8%.

Pension returns to April 2022

  Monthly 1 yr 3 yrs (p.a.) 5 yrs (p.a.) 7 yrs (p.a.) 10 yrs (p.a.)
SRP50 Balanced (60-76) Index -1.4% 4.3% 7.3% 7.5% 7.2% 9.2%
SRP50 Capital Stable (20-40) Index -0.8% 1.0% 3.5% 4.1% 4.2% 5.4%
SRP50 Growth (77-90) Index -1.6% 5.2% 8.3% 8.7% 8.4% 10.4%

Source: SuperRatings estimates

Growth in Super Fund Balances

The ups and downs we have seen across investment markets has led to a bumpy ride for Australia’s super members over the last couple of years.

It’s hard to determine what it all means when looking at returns which are negative one month and positive the next. We remain focused on longer term performance which isn’t as affected by the short-term noise.

Kirby Rappell commented, “Looking back over the last 15 years, the median balanced option has added more than 120%, similarly members sitting in a typical growth option will have seen their retirement nest egg grow by around 121%.

We have seen the greatest increase among Australian Shares and International Shares options of 133% and 132% respectively; however, having your super solely invested in equities will result in more ups and downs due to the greater risk associated, so super funds’ default solutions are designed to better manage this volatility.

These results are despite the drawdowns members experienced following the invasion of Ukraine in February 2022, the impact of the pandemic so far, as well as the GFC period.

We found that a member who had a balance of $100,000 in April 2007 and switched to cash from balanced or growth at the end of March 2020 when the pandemic began would now be around $45-55,000 behind their position if they had not switched.

Kirby Rappell stated, “Making snap decisions can lead to a worse outcome and it’s best to set a long-term strategy and stick to it, as we see markets recover losses from these unexpected events over time.

The chart above shows that over the last 15 years a member in the typical balanced option would have seen a balance of $100,000 in April 2007 grow to $219,775. A member in a growth option fared slightly better with their balance accumulating to $221,058.

Australian Shares options have performed the strongest with the median option rising to $232,095. While the median International Shares option was not far behind at $231,540 despite the uncertainty we have seen across global markets in the last few years.

Release ends

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For more information contact:

Kirby Rappell
Executive Director
Tel: 1300 826 395
Mob: +61 408 250 725

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