The global sell-off of assets due to the COVID-19 pandemic has seen the median growth superannuation fund fall by 9 per cent, the latest figures have found.
Research and data company Chant West’s numbers show the return for the financial year is now negative 6.3 per cent, following a 10.1 per cent reduction in balances in the March quarter.
Chant West senior investment research manager Mano Mohankumar said: “It’s too early to tell what the full economic impact of the virus will be, but members should be able to take some comfort from history. Market corrections do occur, often after a sustained period of growth such as we’ve seen in recent years. Super has had a record run, and it had to come to an end at some time.”
The superannuation researcher also highlighted how the falls could mean members need to rethink the government’s new superannuation policy, as withdrawing funds now locks in losses.
“It’s a difficult time financially for many Australians, and the last thing we want is for fund members to hurt themselves further — especially now the government has created a once-off opportunity for people to withdraw up to $20,000 from their super accounts.
“Those most likely to need to access super through early release are young workers who have no other savings to fall back on.
“Most of their super accounts will be invested in growth assets which will have fallen in value. So, if they take money out, they will be doing the very thing we caution against, which is to lock in what at the moment are only paper losses.”
However, the research institution highlighted that members are still strongly in front, despite the short-term losses caused by COVID-19.
Taking that entire period along with the current financial year to date, where growth funds are down by 6.5 per cent on average, the annualised return is 7.9 per cent. The annual CPI increase over the same period is 2.4 per cent, giving a real return of 5.5 per cent per annum — well above the typical 3.5 per cent target.
“Even looking at the past 20 years, super funds have returned 6.2 per cent per annum, which is in line with the typical return objective. Let’s not forget that the 20-year period now includes three sharemarket downturns — the ‘tech wreck’ in 2001–2003, the GFC in 2007–2009 and now COVID-19,” Mr Mohankumar concluded.
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