Kirby Rappell

With half the country in what seems never ending rounds of lockdowns and pandemic fatigue setting in, one of the last things most Australians want to do is look at their Superannuation balances and investment options.  That is, however, exactly what SuperRatings is wanting us to do, as neglecting your super or responding to short term market moves can have a detrimental effect on your super balance.

SuperRatings Executive Director Kirby Rappell says, ‘We looked at the impact of switching out of a balanced or growth option and into cash at the start of the pandemic and found that those with a balance of $100,000 in January 2020 and who switched to cash at the end of March would now be around $22-27,000 worse off than if they had not switched.’

This effect of switching into cash as a response to market turmoil is also seen when looking at returns over the past 15 years. In this period, a typical balanced Super option has risen substantially, with a balance of $100,000 in July 2006 accumulating to $247,557, more than doubling in size. Those members investing in a growth option have experienced an even stronger result, with a similar starting balance growing to $254,006. Share focused options have delivered the highest returns, with the median Australian shares option growing to $276,099 and the median international shares option growing to $271,051, though these types of options involve greater risks. Over the same period, a $100,000 balance invested in cash would only be worth $151,158 today.

When considering your Super options, you don’t need to go it alone as many Super funds provide advice and tools to their members. Says Mr Rappell, ‘Most funds will offer scaled advice for free or at a low cost, with members able to get advice on topics such as contributions, investment options, insurance in the fund and the transition to retirement.’ Scaled advice is general in nature so you will need to check if your situation and goals align with the advice.

Continues Mr Rappell, ‘For members who want more tailored advice, some funds will offer comprehensive advice that will also take into account your financial assets outside of superannuation.’ While there will be a cost associated with this comprehensive advice, most funds will allow the cost of the advice to be deducted from the superannuation account, just make sure you check any costs and how they can be paid before agreeing to get the advice.

Looking at more recent returns, balances continued to grow in July. The typical balanced option returned an estimated 1.3% over the month and 18.5% over the year. The typical growth option returned an estimated 1.3% for the month and the median capital stable option also increased 0.9% in the month.

Pension returns were also positive in July. The median balanced pension option returned an estimated 1.3% over the month and 20.0% over the year. The median pension growth option returned an estimated 1.5% and the median capital stable option also rose an estimated 0.9% in the month.

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