Super fund returns have hiccup in May but eye a solid financial year

Volatility in financial markets has seen super fund returns bounce around this year, but their likely end result may surprise many.

Super funds remain on track for a positive investment return for 2022-23 despite a negative performance in May.

Research house SuperRatings says the typical balanced super fund fell 0.2 per cent last month, as weaker Australian shares, property and fixed interest investments offset rises by international shares.

It continued a bumpy ride for super fund returns, with five months of falls and six months of rises so far this financial year. However, the year-to-date return for balanced funds has been a solid 7.9 per cent.

SuperRatings executive director Kirby Rappell said it had been a strange year, and many people would be surprised by the overall strength in investment returns.

“We are in a world that feels volatile, but hasn’t mathematically been volatile,” he said.

“Funds are currently on track to deliver a return in excess of inflation, so funds have kept the value of members’ money from diminishing in a high-inflation environment, which has been no simple task.

“Inflation, and the central bank response to inflation, have been the most influential factors for superannuation performance this financial year and we expect this to continue into the 2023-24 financial year.”

JBS Financial Strategists CEO Jenny Brown says people may not realise it’s been a good year for super and investments.

Mr Rappell said Australians today were more engaged with their super, with median balances now near $120,000 compared with $40,000 during the global financial crisis in 2008 and 2009.

“People have to get used to volatility, which is back,” he said.

The looming 0.5 per cent rise in employers’ compulsory Superannuation Guarantee payments from July 1 would benefit younger fund members the most, Mr Rappell said.

“Retirees are feeling the pressure of inflation, coupled with uncertainty,” he said.

JBS Financial Strategists CEO Jenny Brown said the benefits of the SG rise would depend on employees’ salary packages.

“If you are on an $80,000 package including super, you are taking a pay cut,” she said.

Ms Brown said negativity around financial markets and interest rates had hidden the fact that Australian shares had climbed 8.3 per cent in the year to May 31.

“Those who don’t look at the performance on a regular basis don’t really realise that it has been a good year,” she said.

“Make sure you are not trying to time the market … if you are in our 40s you are not going to be able to access your super for another 20-plus years.”

SuperRatings says all super fund categories are up for the financial year to date. Investment returns from capital stable funds, which have just 20-40 per cent of members’ money in growth assets, dropped by 0.2 per cent in May as fixed interest fell, but are up 4.4 per cent financial year-to-date. Growth funds fell 0.3 per cent in May but are up 9.6 per cent.

Originally published as Super fund returns have hiccup in May but eye a solid financial year