Your Money

Super Funds have a welcome return to form

- June 24, 2020 2 MIN READ

According to estimates from leading research house SuperRatings, the median balanced superannuation option rose 2.1 per cent 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 per cent. If super funds do end 30 June in the red, it will be only the fourth negative financial year for super since its inception in 1992.

Since the start of 2020 to the end of May, the median balanced option fell an estimated 5.7 per cent, with the 12-month return holding in positive territory at 0.5 per cent. In contrast, Australian shares, measured by the S&P/ASX 200 Index, fell 13.9 per cent over the calendar year to May and are down 10 per cent 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 per cent in 2020 and is up 0.5 per cent over 12 months, while the capital stable option fell only 2.1 per cent since the start of 2020 and rose an estimated 1.2 per cent 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

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.

Since 1992, the median balanced option has returned an average of 7.0 per cent per annum, which is well above the common long-term objective of CPI plus 3.5 per cent

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

Source: SuperRatings
* FYTD estimate to end May 2020