Market rally boosts superannuation

SUPER funds have risen for a sixth straight month as markets rally but most are still down from a year ago.

After falling sharply, super funds have grown for the sixth month in a row as the market rallied.

Market rally boosts superannuation

SUPERANNUATION funds have risen for a sixth straight month as markets rally but the balances of retirement funds are still down from a year ago, a research company says.

SuperRatings managing director Jeff Bresnahan said the super balances of most people rose over the six months ended August due to a rebound in the local equity market.

The median balanced super fund rebounded 14.3 per cent over the period, although it was still down 7.9 per cent on average from August 2008.

"The surging Australian share market, including the listed property sector, sits behind a sustained superannuation fund rally which has now extended positive returns to the sixth straight month," Mr Bresnahan said.

"This six-month streak is the exact opposite to the previous six months, where six consecutive negative returns were recorded."

Between September 2008 and February this year, there were six consecutive monthly negative returns totalling 18.5 per cent.

Since the share market hit a five-and-a-half year low in early March this year, the All Ordinaries index had risen by 44 per cent by the end of August.

The median balanced superannuation fund rose by 3.13 per cent in the month of August and increased by 7.49 per cent in the August quarter, SuperRatings said.

The median balanced superannuation fund has holdings of 60 to 76 per cent in growth style assets such as equities, and account for about 80 per cent of Australians' retirement savings.

Despite the gloom on financial markets over the past two years, most employees did not change their superannuation portfolios to a more conservative setting, unlike those who had ended their working life, Mr Bresnahan said.

"The short answer is that for most pre-retirees they don't appear to be concerned, with just 3.3 per cent of assets being moved from an aggressive portfolio to a more conservative portfolio in 2008," he said.

"In contrast, retirees were much more active with over 12 per cent of assets moving to conservative options in 2008."

Retirees have around 14.5 per cent of their super in cash options compared to 3.7 per cent for pre-retirees, Mr Bresnahan said.

"So, in essence, these significant short-term movements in markets certainly appear to be affecting retirees more so than those still generally apathetic pre-retirees, as poor market timing can significantly impact benefits."