Superannuation returns record positive rebound from COVID-19

Industry-wide returns on superannuation funds have bounced back to positive territory after negative returns during the early stages of COVID-19.

The average return on superannuation funds regulated by the Australian Prudential Regulation Authority (APRA) with more than four members came in at 6 per cent in the three months to June 2020. This was a “partial recovery” from the -10.3 per cent return in the three months to March, the superannuation watchdog noted in its quarterly superannuation statistics.

However, the annual return rate to June is negative at -1.1 per cent, while the average annualised return rate over the past five years was 5.2 per cent.

The data excludes self-managed super funds, which are regulated by the Australian Taxation Office.

According to the Association of Superannuation Funds of Australia (ASFA), the 6 per cent return in the June quarter represented more than $100 billion in investment returns in the three months.

ASFA chief executive officer Dr Martin Fahy said the figures prove that superannuation has been resilient during the pandemic and the economic downturn. 

“Hard-working Australians can be confident that they are getting a fair go, participating in the economic recovery and that even with modest balances they can access the same opportunities which historically have been reserved for the wealthy,” he said.

“Ordinary Australians saving as a group in APRA regulated funds get the benefits of scale, diversification of risk, and the best investment minds looking after their savings.

“As a result, they can access a range of asset classes, support the important recovery in our economy and continue to outperform so-called sophisticated investors.”

Australia’s superannuation pool clocked up $2.9 trillion, which edged down by 0.6 per cent in the 12 months to June, the APRA report found.

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Annual fee at $50k balance1yr return3yr return5yr return

$497

12.90%

7.70%

8.50%

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High Growth (Lifecycle investment)

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• Industry
• Income protection insurance

$507

10.30%

7.90%

7.50%

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Lifecycle Investment - Balanced

• Promoted
• Industry
• Life insurance
• TPD insurance
• Income protection insurance

$382

9.50%

6.50%

7.30%

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Balanced (Accumulation)

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• Industry
• Life insurance
• TPD insurance
• Income protection insurance

$351

9.80%

6.00%

7.10%

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Personal Account - Balanced (MySuper)

• Promoted
• Industry
• Income protection insurance

$477

10.40%

7.20%

7.10%

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Balanced Growth

• Promoted
• Industry
• Life insurance
• Income protection insurance

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Super looks up for the new financial year

Median growth super funds started the new financial year by delivering 1 per cent growth in July, after a -0.6 per cent return in the 2019-20 financial year.

Super funds are considered growth funds when they have 61-80 per cent invested in growth assets, such as property and shares.

The July result was mainly due to strong performance in the international share market, particularly the US, according to Mano Mohankumar, senior research manager at superannuation research firm Chant West.

“Super funds got off to a good start to FY2021, but there are some major hurdles ahead,” he said. “For a start, we still have no idea how long and deep the current global recession will be.”

Mr Mohankumar said the volatility caused by COVID-19 between March and June was proof of the importance of diversification in super.

“Super fund members should take comfort, however, from their experience last financial year,” he said.

“It provided a valuable reminder that they are invested in well-diversified portfolios spread across a wide range of asset sectors, and that diversification works to cushion the impact during periods of share market weakness.”

Traditional diversified super fund performance (results to July 31, 2020)

Note: Performance is shown net of investment fees and tax. It is before administration fees and adviser commissions.

Source: Chant West.

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