In a year defined by the global pandemic and the locking down of economies, the superannuation system faced arguably one of its toughest test in its 29-year history.

Now, as super funds finalise their reporting for December 2020, the strength of superannuation’s comeback is clear. Despite the market turmoil in the first half of the year, Australia’s top super funds have posted some remarkable results.

Long-term returns have also held up well, evidenced by the 10-year performance rankings, demonstrating the quality of funds available to members.

According to data from leading research house SuperRatings, Suncorp was the top performing fund over the 2020 calendar year, with the Suncorp Brighter Super Pers – Suncorp Multi-Manager Growth Fund returning 9.6%. This was followed by Australian Ethical and Vision SS, whose balanced options returned 8.0% and 6.2% respectively.

Top 20 balanced options over 12 months

Source: SuperRatings

Moving out to 10 years, the top performers were UniSuper, whose balanced option has returned 9.0% p.a. over the last decade, followed closely by AustralianSuper and Cbus.

Top 20 balanced options over 10 years

Source: SuperRatings

Spotlight on risk and return in wake of COVID-19

It is important to consider not only the return that an option delivers but also the level of risk it takes on to achieve that return. A rough way to examine this is the variability in returns over time. Growth assets like shares may return more on average than traditionally defensive assets like fixed income, but this comes with larger ups and downs.

The table below shows the top 20 funds ranked according to their volatility-adjusted return, which measures how much members are being rewarded for taking on the ups and downs.

QSuper’s balanced option return of 7.9% p.a. over the past seven years is below some of its peers, but it has done this with a smoother ride along the way, meaning it has delivered the best return given the level of volatility involved.

Top 20 balanced options over 7 years ranked by risk and return

Option name Rolling 7-year return (% p.a.)
QSuper – Balanced 7.9%
BUSSQ Premium Choice – Balanced Growth 7.8%
Prime Super – MySuper 7.9%
Cbus – Growth (Cbus MySuper) 8.5%
CareSuper – Balanced 7.9%
MTAA Super – My AutoSuper 8.0%
Catholic Super – Balanced (MySuper) 7.7%
VicSuper FutureSaver – Growth (MySuper) Option 8.0%
Mercy Super – MySuper Balanced 7.7%
AustralianSuper – Balanced 8.8%
Aware Super (previously First State Super) – Growth 7.8%
Media Super – Balanced 7.6%
CSC PSSap – MySuper Balanced 7.1%
Sunsuper for Life – Balanced 8.0%
Hostplus – Balanced 8.4%
Vision SS – Balanced Growth 7.9%
HESTA – Balanced Growth 7.7%
Club Plus Super – MySuper 7.3%
Equip MyFuture – Balanced Growth 7.7%
Local Government Super Accum – Balanced Growth 7.3%

Source: SuperRatings

“What the calendar year figures hide is the rollercoaster movements members experienced as the market sold off back in March 2020 and then rapidly recovered,” said SuperRatings Executive Director Kirby Rappell.

“As members accumulate wealth over time, market movements will have a bigger impact on their account balance in dollar terms. This is a challenge for funds and members as the average super balance rises over $100,000, with the need for education and support paramount.”

While it is important to acknowledge those funds that have outperformed over 2020, members should bear in mind that long-term performance is what really counts.

“Overall, funds have done an excellent job of managing risks through a tumultuous period,” said Mr Rappell. “Super is a long-term game, so it’s pleasing to see long-term returns remain healthy and ahead of their CPI+ targets.”

Release ends


Warnings: Past performance is not a reliable indicator of future performance. Any express or implied rating or advice presented in this document is limited to “General Advice” (as defined in the Corporations Act 2001(Cth)) and based solely on consideration of the merits of the superannuation or pension financial product(s) alone, without taking into account the objectives, financial situation or particular needs (‘financial circumstances’) of any particular person. Before making an investment decision based on the rating(s) or advice, the reader must consider whether it is personally appropriate in light of his or her financial circumstances, or should seek independent financial advice on its appropriateness. If SuperRatings advice relates to the acquisition or possible acquisition of particular financial product(s), the reader should obtain and consider the Product Disclosure Statement for each superannuation or pension financial product before making any decision about whether to acquire a financial product. SuperRatings research process relies upon the participation of the superannuation fund or product issuer(s). Should the superannuation fund or product issuer(s) no longer be an active participant in SuperRatings research process, SuperRatings reserves the right to withdraw the rating and document at any time and discontinue future coverage of the superannuation and pension financial product(s).

Copyright © 2021 SuperRatings Pty Ltd (ABN 95 100 192 283 AFSL No. 311880 (SuperRatings)). This media release is subject to the copyright of SuperRatings. Except for the temporary copy held in a computer’s cache and a single permanent copy for your personal reference or other than as permitted under the Copyright Act 1968 (Cth.), no part of this media release may, in any form or by any means (electronic, mechanical, micro-copying, photocopying, recording or otherwise), be reproduced, stored or transmitted without the prior written permission of SuperRatings. This media release may also contain third party supplied material that is subject to copyright. Any such material is the intellectual property of that third party or its content providers. The same restrictions applying above to SuperRatings copyrighted material, applies to such third party content.

November was the strongest month for superannuation in 2020 and the 8th consecutive month of positive returns for members.

As COVID-19 restrictions ease nation-wide and investors look forward to the approval and distribution of a vaccine, share markets globally have pushed to record highs, delivering windfall gains for super members.

According to estimates from leading superannuation research house SuperRatings, the median balanced option returned 4.9% in November as members enjoyed an early Christmas gift that has put them back into the black over the course of a volatile and uncertain year.

Since the start of 2020 the median balanced option has delivered 2.3% and is on track to finish the year in positive territory. Super has bounced back strongly in the second half of the year, returning 7.5% from the start of July to the end of November, reversing the large falls back in February and March.

According to SuperRatings data, the median growth option returned an estimated 6.2% in November and 2.4% over the calendar year, while the median capital stable option returned an estimated 2.0% in November and 1.7% over the calendar year.

“We’ve had a watershed month for super and hopefully this strong performance can continue through to the new year,” said SuperRatings Executive Director Kirby Rappell.

“Given the world is battling a pandemic that has resulted in large sections of the economy being placed in lockdown, the results are remarkable. This is the year super proved its worth once again and reminded us why it is so critical to our economic success.”

Accumulation returns to end of November 2020

CYTD 1 yr 3 yrs (p.a.) 5 yrs (p.a.) 7 yrs (p.a.) 10 yrs (p.a)
SR50 Growth (77-90) Index 2.4% 2.4% 6.6% 7.9% 8.0% 8.4%
SR50 Balanced (60-76) Index 2.3% 2.2% 5.8% 7.1% 7.3% 7.9%
SR50 Capital Stable (20-40) Index 1.7% 1.5% 3.8% 4.3% 4.6% 5.1%

Source: SuperRatings estimates

Pension returns had a similarly strong month. The median balanced pension option rose an estimated 5.4% in November and 2.6% over the calendar year. The median pension growth option rose an estimated 6.8% in November and 2.6% over the calendar year, and the median capital stable pension option returned an estimated 2.3% in November and 2.0% over the calendar year.

Pension returns to end of November 2020

CYTD 1 yr 3 yrs (p.a.) 5 yrs (p.a.) 7 yrs (p.a.) 10 yrs (p.a)
SRP50 Growth (77-90) Index 2.6% 2.6% 7.3% 8.7% 8.9% 9.3%
SRP50 Balanced (60-76) Index 2.6% 2.4% 6.6% 7.8% 7.9% 8.5%
SRP50 Capital Stable (20-40) Index 2.0% 1.7% 4.4% 5.0% 5.2% 5.9%

Source: SuperRatings estimates  

The global recovery is underway and is looking sufficiently V-shaped, but recent economic news has been mixed. Infection rates have risen in the US and Europe, causing a loss of momentum, but news of successful vaccine trials have boosted confidence.

The UK has begun rolling out the Pfizer-BioNTech vaccine, while Australia and the US are preparing to do the same once the vaccine is approved. Meanwhile, China has ramped up its trade conflict with Australia, putting tariffs of up to 200% on Australian wine and suspending the importation of Australian beef, barley and timber.

“Australia’s success in containing the coronavirus has put us in an enviable position, but there are still significant risks at play. The pandemic is not yet defeated and there are geopolitical issues weighing on the outlook. Members should be optimistic but prepare themselves for potential surprises as we head into 2021.”

Release ends


Warnings: Past performance is not a reliable indicator of future performance. Any express or implied rating or advice presented in this document is limited to “General Advice” (as defined in the Corporations Act 2001(Cth)) and based solely on consideration of the merits of the superannuation or pension financial product(s) alone, without taking into account the objectives, financial situation or particular needs (‘financial circumstances’) of any particular person. Before making an investment decision based on the rating(s) or advice, the reader must consider whether it is personally appropriate in light of his or her financial circumstances, or should seek independent financial advice on its appropriateness. If SuperRatings advice relates to the acquisition or possible acquisition of particular financial product(s), the reader should obtain and consider the Product Disclosure Statement for each superannuation or pension financial product before making any decision about whether to acquire a financial product. SuperRatings research process relies upon the participation of the superannuation fund or product issuer(s). Should the superannuation fund or product issuer(s) no longer be an active participant in SuperRatings research process, SuperRatings reserves the right to withdraw the rating and document at any time and discontinue future coverage of the superannuation and pension financial product(s).

Copyright © 2020 SuperRatings Pty Ltd (ABN 95 100 192 283 AFSL No. 311880 (SuperRatings)). This media release is subject to the copyright of SuperRatings. Except for the temporary copy held in a computer’s cache and a single permanent copy for your personal reference or other than as permitted under the Copyright Act 1968 (Cth.), no part of this media release may, in any form or by any means (electronic, mechanical, micro-copying, photocopying, recording or otherwise), be reproduced, stored or transmitted without the prior written permission of SuperRatings. This media release may also contain third party supplied material that is subject to copyright. Any such material is the intellectual property of that third party or its content providers. The same restrictions applying above to SuperRatings copyrighted material, applies to such third party content.

The recovery in superannuation continues as lockdown conditions gradually ease across the country and Australians prepare for a relatively normal summer, with fewer restrictions on gatherings and business operations.

According to estimates from leading superannuation research house SuperRatings, the median balanced option returned 0.5% in October, while positive market movements in November point to continued momentum.

However, the median balanced option remains down -0.8% over the 12 months to the end of October, with members yet to fully recoup their losses since the height of the market turmoil in March. According to SuperRatings, while super has bounced back strongly in the second half of 2020, members should be wary of further market volatility as the global pandemic is brought under control.

“The super recovery is ongoing but has been faster and stronger than expected to date,” said SuperRatings Executive Director Kirby Rappell.

“There are clearly still significant risks and uncertainties, and we expect more market volatility heading into 2021, but overall members have reason to be reassured by the performance and resilience of funds’ portfolios this year.”

According to SuperRatings’ data, the median balanced option returned -2.5% from January to October, but posted a strong recovery in the second half of the year.

The median growth option returned an estimated 0.6% in October and -1.4% over 1 year, while the median capital stable option returned an estimated 0.3% in October and 0.5% over 1 year.

Accumulation returns to end of October 2020

CYTD 1 yr 3 yrs (p.a.) 5 yrs (p.a.) 7 yrs (p.a.) 10 yrs (p.a)
SR50 Growth (77-90) Index -3.5% -1.4% 5.0% 6.5% 7.2% 7.7%
SR50 Balanced (60-76) Index -2.5% -0.8% 4.7% 6.0% 6.6% 7.3%
SR50 Capital Stable (20-40) Index -0.2% 0.5% 3.4% 3.9% 4.4% 4.9%

Source: SuperRatings estimates

Pension returns fared modestly better over the month. The median balanced pension option rose an estimated 0.6% in October and -1.0% over 1 year. The median pension growth option delivered an estimated 0.7% in October and -1.5% over 1 year, and the median capital stable pension option returned an estimated 0.3% in October and 0.5% over 1 year.

Pension returns to end of October 2020

CYTD 1 yr 3 yrs (p.a.) 5 yrs (p.a.) 7 yrs (p.a.) 10 yrs (p.a)
SRP50 Growth (77-90) Index -3.7% -1.5% 5.6% 7.2% 8.0% 8.6%
SRP50 Balanced (60-76) Index -2.5% -1.0% 5.2% 6.5% 7.2% 7.9%
SRP50 Capital Stable (20-40) Index -0.2% 0.5% 4.0% 4.4% 4.9% 5.6%

Source: SuperRatings estimates  

Australian shares bucked the global trend in October to post a 1.9% return as an easing of restrictions, low COVID-19 case numbers, and a highly supportive federal budget bolstered sentiment. Australia was the bright spot amid a resurgence in cases in Europe and a tense US presidential election that fuelled additional volatility.

“Australia’s success comes down to three things: our response to containing the virus, the extraordinary scale of the budget measures, and our superannuation system, which serves as an additional stabiliser to the economy,” said Mr Rappell.

“Looking ahead, it really depends on what a ‘COVID-normal’ world looks like. Developments on the vaccine front are very promising, but things are still uncertain in terms of how we reopen safely and how long this will take. There will still be ups and downs heading into 2021.”

Range of fees between top and bottom quartile funds

Accumulation fees on a $50k account balance Fee as % of balance Calculated fee Member fee Admin fee Investment related fees & costs
Top quartile 1.0% $513 $52 0.11% 0.55%
Median 1.1% $571 $78 0.25% 0.75%
Bottom quartile 1.4% $695 $92 0.52% 0.89%

Fees used in the analysis are as at 30 Sep 2020 using most recent data available to SuperRatings at the time of preparation. Fees includes percentage-based administration fees, member fees, investment management fees (incl. performance-based fees), indirect cost ratios (ICRs) and taxes, but exclude any applicable employer rebates.

The figures in the table are quartiles across the industry for each item, so the calculated fee won’t necessarily reflect the sum of the other items for a $50k balance. But in general the calculated fee represents the total fee calculated based on the member fee, % admin fee and investment related fees and costs.

The top quartile represents the cheapest 25 percent of funds in terms of fees, while the bottom quartile represents the most expensive 25 percent. The median represents the fund that sits in the middle.

The table shows a considerable range in fees being charged by funds across the market, with the most expensive quartile of funds charging $695 or more, compared to $513 or less for the least expensive quartile.

Members should not be single-minded about fees, but it is important to know where your fund sits and whether you are getting value. If your fund’s fees are higher than the median, it might be worthwhile checking your fund’s long-term performance and the suite of benefits it provides to see if the higher fees are justified.

Release ends


Warnings: Past performance is not a reliable indicator of future performance. Any express or implied rating or advice presented in this document is limited to “General Advice” (as defined in the Corporations Act 2001(Cth)) and based solely on consideration of the merits of the superannuation or pension financial product(s) alone, without taking into account the objectives, financial situation or particular needs (‘financial circumstances’) of any particular person. Before making an investment decision based on the rating(s) or advice, the reader must consider whether it is personally appropriate in light of his or her financial circumstances, or should seek independent financial advice on its appropriateness. If SuperRatings advice relates to the acquisition or possible acquisition of particular financial product(s), the reader should obtain and consider the Product Disclosure Statement for each superannuation or pension financial product before making any decision about whether to acquire a financial product. SuperRatings research process relies upon the participation of the superannuation fund or product issuer(s). Should the superannuation fund or product issuer(s) no longer be an active participant in SuperRatings research process, SuperRatings reserves the right to withdraw the rating and document at any time and discontinue future coverage of the superannuation and pension financial product(s).

Copyright © 2020 SuperRatings Pty Ltd (ABN 95 100 192 283 AFSL No. 311880 (SuperRatings)). This media release is subject to the copyright of SuperRatings. Except for the temporary copy held in a computer’s cache and a single permanent copy for your personal reference or other than as permitted under the Copyright Act 1968 (Cth.), no part of this media release may, in any form or by any means (electronic, mechanical, micro-copying, photocopying, recording or otherwise), be reproduced, stored or transmitted without the prior written permission of SuperRatings. This media release may also contain third party supplied material that is subject to copyright. Any such material is the intellectual property of that third party or its content providers. The same restrictions applying above to SuperRatings copyrighted material, applies to such third party content.

SuperRatings has released its top-rated KiwiSaver schemes for 2021. Eight providers were awarded the ‘Platinum’ rating for 2021, with competition continuing to intensify among the Platinum and Gold bands.

SuperRatings’ assessment criteria considers five key factors, including investments, fees, member servicing, scheme administration and governance. Schemes awarded a Platinum rating are well balanced across all key assessment criteria. We believe these schemes are well placed to deliver strong value for members and enhance retirement outcomes relative to their peers.

“The past year has seen all corners of the industry in a state of flux, with the ability to anticipate and adapt to change front and centre, while the challenges of executing this objective have been clear. COVID-19 has impacted investment markets and schemes’ portfolios, as well as business operations, with the complete picture still to emerge.”

“Fees remain a key focus in the New Zealand market, though it is pleasing to see the notion of ‘value for money’ continuing to gain traction. Furthermore, we will be closely monitoring the outcomes of the default provider review, with the tender process currently underway” said SuperRatings Executive Director Kirby Rappell.

“SuperRatings continues to believe the best way to determine value for money involves consideration of investment earnings, as well as the fees charged. We refer to this as the ‘Net Benefit’ outcome”.

Through our Net Benefit research, which models the dollar outcome a member receives in their account we have found that switching fund type can have a significant impact on a member’s retirement balance. With the proposed movement to a Balanced default fund pleasing to see instead of the current Conservative Fund type. In addition, sitting within a strong KiwiSaver Scheme on a Net Benefit basis is also important.

Switching between fund types across the market was elevated during the onset of the pandemic in March, with provision of information regarding the impacts of switching crucial to support member understanding. Interestingly, similar to the GFC we note there was lower switching between schemes during this time of volatility.

It has been pleasing to see schemes proactively engaging with members during this time of heightened uncertainty, with schemes offering additional online content, as well as webinars to provide members with reassurance regarding areas such as investment markets, switching funds and how their balance has been impacted.

We continue to see a rise in the provision of a range of channels through which members can contact their scheme, such as over the phone, click2chat and mobile apps. We note that contact centres were under significant pressure during the pandemic period with schemes having to essentially move these to the virtual environment quickly, which considering the efforts involved, went rather well based on our review of schemes this year.

The role of sustainable investing and ESG factors continues to gain prominence across the KiwiSaver market, with this being called out specifically through the default tender review. We see a range of strategies being pursued here and are supportive of a consideration of these factors. Interestingly, in Australia we have found that strong outcomes can be delivered through investment strategies with an ESG focus and this doesn’t have to come at a higher cost.

Overall, we see the KiwiSaver market maturing and look forward to seeing how schemes continue to navigate the uncertain environment we are operating in, with a focus on delivering strong retirement outcomes for members.

SuperRatings’ Scheme Rating Criteria

 

New Zealand’s Top Rated Schemes

Platinum Rated Schemes

ANZ Default KiwiSaver Scheme
ASB KiwiSaver Scheme
BNZ KiwiSaver Scheme
Fisher Funds KiwiSaver Scheme
Fisher Funds TWO KiwiSaver Scheme
Mercer KiwiSaver Scheme
Milford KiwiSaver Plan
New Zealand Defence Force KiwiSaver Scheme

Gold Rated Schemes

AMP KiwiSaver Scheme
ANZ KiwiSaver Scheme
Aon KiwiSaver Scheme
Booster KiwiSaver Scheme
Generate KiwiSaver Scheme
Kiwi Wealth KiwiSaver Scheme
OneAnswer KiwiSaver Scheme
Simplicity KiwiSaver Scheme
Westpac KiwiSaver Scheme

 

Release ends

 

About SuperRatings

SuperRatings Pty Ltd ABN 95 100 192 283 AFSL No. 311880 (SuperRatings) is a superannuation research house with specialist areas of expertise that was originally established in 2002. From 1 July 2011, SuperRatings became a fully owned subsidiary of the entity currently registered as Lonsec Fiscal Holdings Pty Ltd, a privately owned entity with a multi-brand strategy of providing leading financial services research and investment execution. SuperRatings believes that professional financial services institutions and members need informed opinions on the best superannuation and pension financial products. To meet this need, SuperRatings has in place an experienced research team, which draws on a robust research process to undertake in-depth assessment of superannuation financial products. No fee is paid by superannuation and pension funds to SuperRatings for reviewing and rating superannuation and pension financial products.

SuperRatings and Lonsec have announced the winners of this year’s Fund of the Year Awards, which was held virtually for the first time in the event’s 18-year history.

The Fund of the Year Award went to QSuper, which also took home the Pension of the Year Award and the Smooth Ride Award. UniSuper claimed the MySuper of the Year Award, and Sunsuper clinched the MyChoice Super of the Year Award.

The winners were announced at a virtual awards event on 29 October, broadcast live from the Museum of Contemporary Art, Sydney.

“It’s important to recognise the significant work that all funds have done to support their members through a very challenging year,” said SuperRatings Executive Director Kirby Rappell.
“In a highly competitive field, we decided that QSuper was the fund that performed most strongly across the key criteria of investment performance, fees, member services, financial advice and insurance, and fund governance.”

“Congratulations to the team at QSuper on a fantastic effort. It was a strong field this year and we note the high calibre of all award winners, with the quality of their offerings shining through the pandemic.”

“A lot has changed in super, and there are even more changes to come. We should always be focused on improvement, but we shouldn’t lose sight of the incredible outcomes being produced by a large number of funds, both for their members and the retirement system as a whole. Despite the uncertainty, there is every reason to be positive about super.”

 

Congratulations to all of the finalists for this year’s SuperRatings and Lonsec Fund of the Year Awards Dinner. A full list of the awards is available below.

SuperRatings Fund of the Year Award

Winner

QSuper
 
 
 
 
 
 
 
 

SuperRatings MySuper of the Year Award

Awarded to the fund that has provided the Best Value for Money Default Offering.

Winner
UniSuper

Finalists
AustralianSuper
BUSSQ
CareSuper
Cbus
Equip
HESTA
QSuper
Sunsuper
TelstraSuper
UniSuper

SuperRatings MyChoice Super of the Year Award

Awarded to the fund with the Best Value for Money Offering for Engaged Members.

Winner
Sunsuper

Finalists
AustralianSuper
Aware Super
Hostplus
Mercer Super Trust
NGS Super
QSuper
Statewide Super
Sunsuper
Tasplan
UniSuper

SuperRatings Pension of the Year Award

Awarded to the fund with the Best Value for Money Pension Offering.

Winner
QSuper

Finalists
AustralianSuper
Aware Super
BUSSQ
Cbus
HESTA
Hostplus
QSuper
Sunsuper
TelstraSuper
UniSuper

SuperRatings Career Fund of the Year Award

Awarded to the fund with the offering that is best tailored to its industry sector.

Winner
Cbus

Finalists
BUSSQ
Cbus
HESTA
Mercy Super
TelstraSuper
Hostplus

SuperRatings Momentum Award

Awarded to the fund that has demonstrated significant progress in executing key projects that will enhance its strategic positioning in coming years.

Winner
Aware Super

Finalists
Aware Super
Cbus
Equip
HESTA
Mercer Super Trust
Sunsuper

SuperRatings Net Benefit Award

Awarded to the fund with the best Net Benefit outcomes delivered to members over the short and long term.

Winner
AustralianSuper & HESTA

Finalists
AustralianSuper
Cbus
HESTA
Hostplus
QSuper
UniSuper

SuperRatings Smooth Ride Award

Awarded to the fund that has best weathered the ups and downs of the market, while also delivering strong outcomes.

Winner
QSuper

Finalists
AustralianSuper
Aware Super
BUSSQ
CareSuper
Cbus
QSuper

Infinity Award

Awarded to the fund most committed to addressing its environmental and ethical responsibilities.

Winner
Local Government Super

Finalists
Australian Ethical Super
CareSuper
Christian Super
Future Super
HESTA
Local Government Super

Lonsec Investment Option Award

Seeks to recognise and highlight the work of asset managers and key players incorporating ESG.

Winner
CareSuper – Sustainable Balanced

Finalists
CareSuper – Sustainable Balanced
Cbus – Growth (Cbus MySuper)
Suncorp Multi-Manager Growth
Sunsuper for Life – Balanced

 

Release ends

The recovery in superannuation continued through August as funds posted their fifth consecutive month of gains amid signs of economic recovery in the September quarter.

Market stability and continued momentum in shares helped to bolster account balances in August. However, while consumers and investors are looking ahead to a ‘COVID normal’ world, the recovery is highly dependent on infection rates and the gradual easing of restrictions across the country.

According to estimates from leading superannuation research house SuperRatings, the median balanced option returned 1.8% in August, taking the financial year to date return to 2.9%. While super has so far performed strongly in the second half of 2020, members should be wary of further market volatility as the global pandemic rolls on.

“Australia has navigated the pandemic incredibly well compared to other countries, which has helped boost confidence locally,” said SuperRatings Executive Director Kirby Rappell. “Two key contributors are the relative success of Australian governments in managing the pandemic, and the stability that superannuation provides to our economy and financial system.”

“The theme for the second half of 2020 will hopefully be one of continued recovery, however this will likely be unevenly spread across markets and regions. The harsher lockdown conditions in Victoria will have a significant impact on long-term growth, and we expect more ups and downs in the market as the outlook evolves.”

According to SuperRatings’ data, the rolling 1-year return for the median balanced option moved back into positive territory, recording an estimated 0.8% to the end of August, but remains down 2.4% on the start of 2020. Both the growth and capital stable options are estimated to have gained 0.7% over the year to August.

Accumulation returns to end of August 2020

  CYTD 1 yr 3 yrs (p.a.) 5 yrs (p.a.) 7 yrs (p.a.) 10 yrs (p.a)
SR50 Growth (77-90) Index -3.0% 0.7% 6.4% 7.1% 7.8% 8.2%
SR50 Balanced (60-76) Index -2.4% 0.8% 5.9% 6.3% 7.1% 7.7%
SR50 Capital Stable (20-40) Index -0.4% 0.7% 3.8% 4.1% 4.7% 5.1%

Source: SuperRatings estimates

Pension returns have fared modestly better over the past year. The median balanced pension option is estimated to have risen 0.9% over the 12 months to August, while the growth option is estimated to have risen 1.0% and the capital stable option 0.9%.

Pension returns to end of August 2020

  CYTD 1 yr 3 yrs (p.a.) 5 yrs (p.a.) 7 yrs (p.a.) 10 yrs (p.a)
SRP50 Growth (77-90) Index -3.2% 1.0% 7.0% 7.9% 8.7% 9.1%
SRP50 Balanced (60-76) Index -2.4% 0.9% 6.3% 7.0% 7.7% 8.4%
SRP50 Capital Stable (20-40) Index -0.6% 0.9% 4.4% 4.6% 5.2% 5.7%

Source: SuperRatings estimates  

Taking a long-term view, super returns have done an incredible job at accumulating wealth for retirees over a period that includes two major financial and economic crises. According to SuperRatings’ data, since August 2005, a starting balance of $100,000 would now be worth $238,286 for members in a balanced option. For a growth option this would be $239,917. A member with full exposure to Australian shares would have seen their balance growth to $255,883. In contrast, returns on cash would have seen the balance grow to only $157,193.

Growth in $100,000 invested over 15 years to 31 August 2020

Source: SuperRatings estimates

In a financial year that saw a bull market turn into a sharp selloff followed by a recovery, super funds were rocked by a level of volatility not seen since the financial crisis a decade ago.

As funds finalise their reporting for June 2020, the fallout from the Covid-19 crisis is clear, but far from the sea of red that members and commentators may have expected back in March. For members invested in any of the top 15 performing balanced options, the past year has netted a slim but positive return compared to the estimated median return of -1.2%.

According to data from leading research house SuperRatings, Suncorp was the top returning fund over the 12 months to the end of June, with the Suncorp Multi-Manager Growth Fund returning 3.8%. This was followed by BUSSQ and Australian Ethical Super, whose balanced options returned 2.5% and 2.4% respectively.

Top 10 SR50 Balanced Index options over 12 months

* Interim return
Source: SuperRatings. Returns to end June 2020.

While it is important to acknowledge those funds that have outperformed during the Covid-19 pandemic to date, members should bear in mind that long-term performance is what really counts.

Over 10 years, the top performers are AustralianSuper, whose balanced option has returned 8.8% p.a., followed closely by UniSuper and Hostplus. Performance for the median balanced option continues to hold strong, returning an estimated 7.6% over the decade to 30 June 2020.

Top 10 SR50 Balanced Index options over 10 years

Source: SuperRatings. Returns to end June 2020.

“Importantly, over the long term, returns remain very healthy,” said SuperRatings Executive Director Kirby Rappell. “Super is a long-term game, so members should avoid chasing short-term results and ensure they are invested in a quality fund with the right investment strategy that is well positioned to deliver for their needs over the course of their working life.”

Interestingly, only half of the top performing funds over 12 months were among the top performing funds over 10 years, highlighting the difficulty for investment strategies to perform well in differing market conditions over a longer term.

“It was pleasing to see 15 out of the 50 options in the SR50 Balanced Index generate a positive return in the 2019-20 financial year, which speaks to the quality of funds available to members,” said Mr Rappell.

“Managing risks while delivering a positive return in this environment has been a real challenge, and this is likely to continue through the rest of 2020.”

According to SuperRatings, given the success of super over the past 10 years in accumulating wealth, members will feel the bumps more when markets go down.

“Prior to Covid-19, we saw the industry average account balance rise over $100,000, compared to around $30,000 during the GFC,” said Mr Rappell.

“This means that, on an absolute basis, members will see their balance move around a lot more than they have previously. Funds have done an excellent job of both managing risk and educating their members on these issues, but more can be done in this space.”

QSuper delivered the best return to risk ratio of its peers over the 7 years to 30 June 2020. While CareSuper, Cbus, MTAA, VicSuper and AustralianSuper delivered a higher return over this period, they did so at a slightly higher level of risk.

Top 10 SR50 Balanced Index options over 7 years ranked by risk and return

OptionRankingReturn % p.a.
QSuper – Balanced18.0%
BUSSQ Premium Choice – Balanced Growth27.9%
CareSuper – Balanced38.1%
Cbus – Growth (Cbus MySuper)48.5%
MTAA Super – My AutoSuper58.0%
VicSuper FutureSaver – Growth (MySuper) Option68.2%
Catholic Super – Balanced (MySuper)77.8%
First State Super – Growth88.0%
AustralianSuper – Balanced98.8%
Media Super – Balanced107.7%

Source: SuperRatings. Returns to end June 2020. Risk and return ranking based on Sharpe ratio.

 

Release ends

We welcome media enquiries regarding our research or information held in our database. We are also able to provide commentary and customised tables or charts for your use.

For more information contact:

Kirby Rappell
Executive Director
Tel: 1300 826 395
Mob: +61 408 250 725
Kirby.Rappell@superratings.com.au

Super funds have proven resilient to the turmoil that hit markets in the wake of the COVID-19 outbreak, extending their recovery through May and early June, and are on track to finish the 2019-20 financial year down but far from out.

According to estimates from leading research house SuperRatings, the median balanced option rose 2.1% in May, driven by a strong rise in share markets on the back of better-than-expected economic news and the beginning of a staged reopening of the economy.

Based on current estimates, the financial year-to-date return for the median balanced option at the end of May is -1.6%. If super funds do end 30 June in the red, it will be the fourth negative financial year for super since its inception in 1992, but also likely the mildest.

“Super members have benefitted from recent gains, but markets are still under pressure and remain vulnerable to negative news, including a potential second wave of COVID-19 infections,” said SuperRatings Executive Director Kirby Rappell.

“Funds were hit hard in February and March, and some saw that as an opportunity to raise questions about the value of super. Since then we’ve had two strong months and the critics have certainly been quieter, but we know there’s a long way to go before super balances return to a more stable footing.”

Since the start of 2020 to the end of May, the median balanced option fell an estimated 5.7%, with the 12-month return holding in positive territory at 0.5%. In contrast, Australian shares, measured by the S&P/ASX 200 Index, fell 13.9% over the calendar year to May and are down 10.0% over 12 months.

The median growth option, which generally has a higher exposure to shares and other risk assets, is down an estimated 6.8% in 2020 and is up 0.5% over 12 months, while the capital stable option fell only 2.1% since the start of 2020 and rose an estimated 1.2% over 12 months.

Accumulation returns to end of May 2020

  CYTD 1 yr 3 yrs (p.a.) 5 yrs (p.a.) 7 yrs (p.a.) 10 yrs (p.a)
SR50 Growth (77-90) Index -6.8% 0.5% 5.1% 5.4% 7.6% 7.7%
SR50 Balanced (60-76) Index -5.7% 0.5% 4.8% 5.3% 7.0% 7.3%
SR50 Capital Stable (20-40) Index -2.1% 1.2% 3.3% 3.5% 4.4% 5.1%

Source: SuperRatings estimates

Pension returns have held up slightly better, with the median balanced pension option down an estimated 6.1% since the start of 2020, the median growth option down 7.4%, and the median capital stable option down 2.3%.

Pension returns to end of May 2020

  CYTD 1 yr 3 yrs (p.a.) 5 yrs (p.a.) 7 yrs (p.a.) 10 yrs (p.a)
SRP50 Growth (77-90) Index -7.4% 0.6% 5.7% 6.0% 8.4% 8.5%
SRP50 Balanced (60-76) Index -6.1% 0.6% 5.1% 5.5% 7.5% 8.0%
SRP50 Capital Stable (20-40) Index -2.3% 1.3% 3.9% 4.0% 5.0% 5.8%

Source: SuperRatings estimates  

Members should expect to see their super balance move around as markets deal with the significant uncertainty surrounding COVID-19, however members in well-diversified options will feel the bumps less.

“Things are changing quickly, but there are certainly some early positive signs with businesses reopening and beginning to scale back up,” said Mr Rappell. “Full recovery may take some time, but funds are well equipped to manage the short-term risks and position themselves for future growth once we start returning to normal.

Super funds ahead of long-term objective despite GFC and COVID-19

Despite the challenge that COVID-19 poses to financial markets, superannuation has proved resilient, much as it did during the Global Financial Crisis (GFC) of 2008 and 2009.

Remarkably, since 1992, the median balanced option has returned an average of 7.0% per annum, which is well above the common long-term objective of CPI plus 3.5% (see chart below).

Median balanced option financial year returns since the introduction of the Super Guarantee


Source: SuperRatings

* FYTD estimate to end May 2020

“Super members may understandably feel disillusioned after watching their balances go down through February and March,” said Mr Rappell. “But super is a long-term game, and members should be cognisant of the steady gains super has delivered over a long period of time and will continue to deliver into the future.”

“What really matters for most members is whether funds are meeting their long-term objective, and by this metric super has been an incredible success. Funds came back strongly after the GFC and there’s good reason to believe they’ll do the same this time around.”

In the wake of the most challenging quarter for financial markets in living memory, super members are scrambling to check their account balances to see what effect the sell-off is having on their retirement savings.

While members are undoubtedly nervous and wondering what the market has in store for them next, leading research house SuperRatings cautioned members against making investment decisions based on an emotional reaction to the current environment.

“Our message for super members, especially those further from retirement, is stay invested if you can,” said SuperRatings Executive Director Kirby Rappell.

“Knee-jerk changes to your portfolio could have a negative effect on your retirement. Switching to cash will lock in losses and mean you miss out on the upside when the market eventually recovers. We suggest members talk to their fund or financial adviser to help ensure any decision is aligned with a long-term strategy.”

Superannuation has been hit hard by the coronavirus and the market’s reaction to extreme measures such as social distancing, lockdowns, and travel bans.

According to estimates from leading research house SuperRatings, the median balanced option fell 8.9% in March and is down 10.0% over the quarter.

The median growth option, which generally has a higher exposure to shares, fell 12.5% in March and 14.1% over the quarter. The median capital stable option fared relatively well amid the market turmoil, falling only 4.1% in March and 3.8% over the quarter.

Accumulation returns to end of March 2020

  CYTD 1 yr 3 yrs (p.a.) 5 yrs (p.a.) 7 yrs (p.a.) 10 yrs (p.a)
SR50 Growth (77-90) Index -14.1% -6.4% 3.1% 3.7% 6.8% 6.5%
SR50 Balanced (60-76) Index -10.0% -3.1% 3.7% 4.3% 6.7% 6.5%
SR50 Capital Stable (20-40) Index -3.8% 0.4% 3.1% 3.2% 4.5% 4.9%

Source: SuperRatings estimates

Pension returns have also been buffeted by the wave of selling. The median balanced pension option fell an estimated 10.2% over the March quarter, while the median growth option fell 14.4%. In contrast, the median capital stable option was down 3.8%.

Pension returns to end of March 2020

  CYTD 1 yr 3 yrs (p.a.) 5 yrs (p.a.) 7 yrs (p.a.) 10 yrs (p.a)
SRP50 Growth (77-90) Index -14.4% -5.9% 3.7% 4.4% 7.8% 7.3%
SRP50 Balanced (60-76) Index -10.2% -2.5% 4.2% 4.6% 7.3% 7.2%
SRP50 Capital Stable (20-40) Index -3.8% 1.0% 3.8% 3.7% 5.1% 5.6%

Source: SuperRatings estimates

The only good news in March seemed to be signs of a relief rally as markets priced in the government’s fiscal stimulus packages and the Reserve Bank of Australia’s bond-buying program, along with similar efforts from governments globally.

While more pain is expected, markets have already sold off heavily in response to the coronavirus and the measures taken to contain it.

How is your super option exposed to market moves?

According to SuperRatings, times of severe market stress can make investors second-guess their long-term investment strategy. For super members, switching to a more conservative investment option in the middle of a crisis can lock in significant losses and mean missing out on the upside when markets inevitably recover.

Older members nearing retirement are likely to be in conservative balanced or capital stable options which have higher allocations to defensive assets, providing protection from share market movements.

As the chart below shows, Australian and international shares generally make up just over half of the portfolio for a balanced option, with the rest invested in bonds, property, alternative assets, and cash. For growth options, shares typically make up around 67% of the portfolio, meaning members are more exposed to movements in share markets.

In contrast, members in a capital stable option will typically have only a 20% allocation to shares, with much higher allocations to bonds and cash, providing more stability and protection against share market swings.

Over time we have seen funds investing more in Alternative assets such as unlisted property, infrastructure and private equity, with these assets representing around 20% of the average balanced fund’s portfolio in 2019, up from 15% in 2008.

Asset allocation by investment option


Source: SuperRatings indices

Members need to keep the current market conditions in context. For most members, while there may be a fall on paper, the loss only becomes crystallised when members sell out. If you’re in the 20 to 40 age bracket, you have another 30 to 50 years to go before you need to start drawing down on your super. Even members in their 50s will need to rely on their super for drawdowns over the next 20 to 30 years.

According to estimates from leading research house SuperRatings, super funds had a positive start to 2020, with the median balanced option returning 1.9% in January, driven predominately by gains from Australian and International shares.

The start of February was a different story as markets were affected by the outbreak of the Coronavirus, which led to a selloff in global share markets as investors sought out safe-haven assets.

Asian equity markets have borne the brunt of the initial impact, but the effects are likely to be felt across global markets, noting that previous outbreaks over the last two decades have resulted in short–term equity market corrections within a range of 5–15%.

As super funds face the new normal of lower returns and yields, managing volatility is becoming increasingly necessary. However, despite the current swings in the market, SuperRatings said funds remained focused on long-term member outcomes.

“The funds we’ve spoken to are not responding to the current market situation with knee-jerk reactions,” said SuperRatings Executive Director Kirby Rappell.

“They’re watching developments closely, but so far market volatility has been in line with similar risk events experienced in recent years. Fund investment strategies are generally well placed to manage these types of movements.”

Looking back at previous epidemics, such as the Ebola outbreak in 2018 or the SARS epidemic back in 2003, Australian super funds have proved relatively resilient to short-term market movements. Quarterly returns during each episode have ranged between -2.1% and +4.3%, with markets largely unfazed over longer periods.

Outbreaks and SR50 Balanced Index performance


Source: SuperRatings, Financial Express

Whether the effect of the Coronavirus has a more lasting impact on markets remains to be seen, but funds are unlikely to implement any dramatic changes to their investment strategies without further evidence that the virus will deal more prolonged damage to the global economy.

Con Michalakis, Chief Investment Officer at StateWide Super, said that while there would undoubtedly be some economic fallout, the fund remains focused on long-term member outcomes. “This is a classic case of a black swan, and like all black swans the markets struggle with uncertainty,” said Mr Michalakis.

“What we can be sure about is that the economy in China and Australia will be slower due to the restrictions in place in the first quarter of 2020. However, from a long-term perspective, diversification and strategy based on member age and risk tolerance is more important.”

Suzanne Branton, Chief Investment Officer at CareSuper, said the fund’s investment strategies are designed to provide downside protection during bouts of market turmoil.

“When new influences on the investment outlook emerge, it’s important to analyse and monitor these closely,” said Ms Branton.

“There could be a short-term impact that provides investment opportunities or avenues to adjust positioning. However, there are reasons to expect a more short-term rather than extended large-scale market impact. Our investment approach is structured to deliver downside protection so our investment program resilience to short-term volatility is high.”

Super funds post solid returns in January as share markets powered into 2020

Super funds started the year in positive territory as momentum in local and international share markets carried through into the new year. This was quickly reversed following the outbreak of the Coronavirus and the ensuing drawdown in markets, but over longer periods super fund returns are holding up remarkably well.

Over 12 months to the end of January, the median balanced option returned an estimated 13.8%, while the median growth option return was estimated at an impressive 16.2%. Returns over the past seven years are estimated at 8.8% and 9.8% respectively.

Estimated accumulation returns (% p.a. to end of January 2020)

  1 yr 3 yrs 5 yrs 7 yrs 10 yrs
SR50 Growth (77-90) Index 16.2% 10.2% 8.2% 9.8% 8.8%
SR50 Balanced (60-76) Index 13.8% 9.1% 7.7% 8.8% 8.2%
SR50 Capital Stable (20-40) Index 7.7% 5.3% 4.6% 5.3% 5.6%

Source: SuperRatings

Pensions have delivered even higher returns than accumulation products, with the median balanced pension option returning an estimated 15.4% over the 12 months to the end of January, while the median growth pension option had an estimated return of 18.0%. Over the past seven years each have returned 9.6% and 10.8% respectively.

Estimated pension returns (% p.a. to end of January 2020)

  1 yr 3 yrs 5 yrs 7 yrs 10 yrs
SRP50 Growth (77-90) Index 18.0% 11.4% 9.3% 10.8% 9.7%
SRP50 Balanced (60-76) Index 15.4% 9.8% 8.1% 9.6% 9.0%
SRP50 Capital Stable (20-40) Index 8.9% 6.2% 5.2% 5.9% 6.3%

Source: SuperRatings

“We expect to see volatility appear more frequently over the course of 2020, but overall our outlook for super funds is positive,” said Mr Rappell.

“Long-term returns will continue to hold up despite the challenging return environment we find ourselves in at present. Members should look forward to a solid 2020, but expect some bumpiness along the way.”

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