According to research from Chant West, this was down from the 6.1 per cent growth for the March quarter, but it took the total returns for the first 10 months of the financial year to 5.2 per cent.
Chant West senior investment research manager Mano Mohankumar believes returns will be down for the year despite finishing in the black for the 10th consecutive year.
“The return isn’t likely to match the 9 per cent average return of the past nine years, but that strong run should be seen as the exception rather than the rule. With inflation running at about 1.5 per cent, a return of about 5 per cent would be broadly in line with the long-term return objective, which is to beat inflation by 3.5 per cent,” said Mr Mohankumar.
The resurgence came on the back of strong growth both domestically and overseas. Australian shares were up by 10.9 per cent over the quarter while international shares grew by 12.7 per cent, according to Chant West.
Lifecycle products behaving as expected
Meaningful numbers of super holders are now moving to what is known as a lifecycle designed super, where members are allocated an age-based option that is progressively de-risked as they age.
While this is common with MySuper, most not-for-profit funds still use their traditional growth-based option as a default.
Aside from 2018, there has been strong performance from growth assets in recent years, so younger members have benefited from this lifecycle style fund.
The older cohort, those born in the 1960s and earlier, are less exposed to market risk. So, despite receiving lower returns, they are able to protect against the downturns, such as 2018.
Why it’s best to start young
A UNSW Business School academic, Professor John Piggott, believes it’s important that adults start saving as early as possible due to the compounding effects of superannuation.
“Although the amount seems small, it’s a start. As you progress through your career, the most powerful force that will augment your superannuation accumulation is compound interest. So, starting early means compound interest has a better chance,” Professor Piggott said.
“If you start early, then you will probably retain that habit and that can be very beneficial – in terms of the decision-making that you gradually learn to undertake and to refine through your work life,” Professor Piggott said.