Super funds finish year on a high

Super funds have recovered from initial pandemic impacts and delivered $300 billion to their members in FY2021, according to preliminary data from SuperRatings.

Over the 2020-21 financial year, the median balanced option came back on track to deliver a return of 17.1%, the second highest figure since 1992, driven by a rapid recovery in domestic and global equity markets since falls of 20% to 30% at the outset of the pandemic and strong listed property returns, the data said.

At the same time, pension returns were also positive in June, with the median balanced pension option returning an estimated 1.4% over the month and 18.6% over the financial year to date.

“A year ago, it would have been hard to believe that the typical balanced option would be delivering a near record return for the 2021 financial year. Since 1992, the benefits delivered by super funds are clear, with an average return of 7.4% each year,” the report said.

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“This is over 2% per annum ahead of fund objectives and demonstrates the value added to everyday Australians over the long term. The way in which funds have weathered the COVID-19 storm also shows the resilience of funds’ portfolios, as well as the levers they have in place to protect members when the market ride becomes bumpy.”

Further to that, super funds continued to build members’ wealth, with the median balanced option fund adding more than 140% over the past 15 years, while members in growth options have seen their savings grow by almost 150%, despite the significant drawdowns members experienced during February and March of 2020.

“We found that a member who had a balance of $100,000 in January 2020 and switched to cash from balanced or growth at the end of March would now be around $20,000 to 25,000 behind their position if they had not switched. This again highlights the problems with trying to time the market,” the report said.

SuperRatings said that strong performance aside, it would be important to put this into context, with funds aiming to beat inflation by a certain amount, with targets of CPI + 3% or 3.5% over 10 years being common benchmarks used.

“Considering our estimate of performance over the 10-year period to 30 June, 2021 of 8.2% for the median balanced option, this benchmark is easily being exceeded against an inflation estimate of around 2%,” the report concluded