October growth points to double-digit annual returns for superannuation funds

Superannuation funds are likely to report another year of double-digit returns for members after the median balanced option rose an estimated 0.7 per cent in October.

In the calendar year to date, the median balanced option is up 11.2 per cent, which is well in excess of super funds’ objectives.

Superannuation funds are likely to report another year of double-digit returns for members after the median balanced option rose an estimated 0.7 per cent in October, according to the superannuation research SuperRatings.

The median growth option rose by a similar amount, with the median capital stable option flat, returning 0.0 per cent in the month.

In the calendar year to date, the median balanced option is up 11.2 per cent, which is well in excess of funds’ objectives.

“(2021) has been a strong year for superannuation, with returns nearly three-and-a-half times those of calendar year 2020 and almost double the yearly average for the past 20 years,” SuperRatings executive director Kirby Rappell said.

Pension funds were also in positive territory in October, with the median balanced pension option returning an estimated 0.7 per cent over the month and 11.7 per cent in the calendar year to date.

This month marked the beginning of the government’s new stapling legislation, which is intended to prevent creation of multiple accounts for members when they take a new job.

The new stapled fund will be a member’s superannuation fund for life, following them as they change employment.

It requires employers to check with new workers to see if they have an existing superannuation account.

Markets in the 2021 financial year defied Covid-19 lockdowns to drive more than $300bn in returns to superannuation members.

The median balanced option delivered a 17 per cent return, which was the second highest figure since 1992.

 

The key drivers of the result were a rapid recovery in domestic and global equity markets since falls of 20-30 per cent in the early stage of the pandemic, as well as strong listed property returns.

While the sector’s performance overall was strong, there was also a group of industry laggards, with the corporate regulator warning the nation’s 13 worst-performed funds against providing their 1.1 million members with “misleading” information about their performance.

The 13 funds failed the Australian Prudential Regulation Authority’s first superannuation performance test, including Commonwealth Bank’s in-house super product.

The largest default superannuation providers to have failed the new test were Colonial First State and BT.

Together, the pair have about 777,000 member accounts across their two underperforming products, with a combined total of $56bn in assets.

By the end of September, they had to send a letter to the affected members informing them that their superannuation was invested in a product that “has performed poorly”.

“As a result, we are required to write to you and suggest that you consider moving your money into a different superannuation product,” the pro-forma letter said.

Originally published as October growth points to double-digit annual returns for superannuation funds