Can super funds continue to excel?

By Cameron Micallef

September 06 2019
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While superannuation funds have delivered stellar results for a decade, a myriad of concerns has meant industry experts are questioning whether such growth can continue for the next 10 years.

According to think tank Rice Warner, many super fund members are becoming complacent with their funds and expect them to continue to achieve higher growth despite dire predictions for economic growth, negligible interest rates, higher debt levels and the rising price of property.

The research house surveyed a number of industry professionals and found that experts themselves are also to blame as they are “sticking to conventional forecasts of future performance and are not building in the impact of the global economic crises”.

Should targets be reset?

Rice Warner has argued that traditional fund targets need to be altered due to the dramatically changed economic conditions.

Traditionally, superannuation funds aim for CPI increases plus an added 3.5 to 4 per cent a year in member returns.

The report noted that while the same survey of asset consultants and large funds is undertaken every year about the expectations for all asset classes over the next decade, “the expected outcomes have not changed much even from year to year, though economic circumstances have been different”.

Do members need to be informed?

As it stands, members can only rely on past performance as a guide to how their superannuation fund will perform, according to Rice Warner, as returns are “opaque”, from its perspective.

This means retirees planning futures based off 7 per cent returns where they can realistically expect returns closer to 5 per cent for the foreseeable future, it continued.

The think tank has questioned whether members should be warned to expect lower returns as weaker economic conditions continue.

With much lower nominal returns in a low interest rate and inflation environment very probable, Rice Warner said some members might need to be informed that they would have to tolerate higher levels of volatility “if they are to have a reasonable chance of achieving adequate long-term returns”.

About the author

Cameron Micallef

Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

About the author

Cameron Micallef

Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

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Retirement