The median balanced super fund declined 2.1 per cent in January, according to estimates from SuperRatings, during a turbulent period for markets locally and abroad.

The median growth option was down 2.9 per cent, while the median capital stable option moved 0.9 per cent lower as concerns grew about higher inflation and rising interest rates.

“Falling interest rates have supported rising asset prices and we have seen extremely strong returns over the past five, 10 and 20 years. Inflation has been within the RBA’s target for much of this time,” explained SuperRatings executive director Kirby Rappell.

“However, we are seeing an uptick here which has flow on effects for investment markets and the super balances of Australians.”

While the median balanced super fund returned 13.4 per cent in 2021, Aussies have now been told to prepare for increased volatility that may result from higher interest rates.

“This is a big shift given we have become so used to the trend of falling rates over an extended period. We have had a strong decade of super returns and we have been through a variety of market environments since 1992,” Mr Rappell said.

However, super fund members have been warned not to make any rash decisions that may impact their savings for retirement.

“While we have seen super fund performance take a hit this month, it is important that people remember that super is a long-term investment,” said Mr Rappell.

“Trying to time the market can see members end up in a worse position, so it’s best to talk to your fund or an adviser before making any changes.”

Mr Rappell pointed out that super funds had consistently delivered returns beyond their typical objective of 3 per cent above the consumer price index (CPI), including a return of 8.7 per cent for the median balanced option and 9.8 per cent for the median growth option over 10 years.

“If you had switched to cash at the start of last year you would have seen a return of 0.1 per cent instead of 13.4 per cent for a balanced option,” he added.

Members should also take note that the performance of the share market, including January’s 6.3 per cent drop for the S&P/ASX 200 and 5.3 per cent fall for the S&P 500, is not the only factor that determines their super performance.

“Always remember, only about 50 per cent of investments are in shares so your super should be less volatile if you are in a balanced option or a more conservative option,” explained Mr Rappell.

“This means that members sitting in these options are not as affected by the ups and downs in stock markets we have seen recently.”