Superannuation balances take a big hit in March: SuperRatings

The median balanced super fund shed 8.9 per cent in March, but savers are being cautioned against a knee-jerk response.

Retirement savers are being cautioned against walking away from investments in the face of painful losses.

Just under 9 per cent of super savings evaporated in March as the COVID-19 crisis sent sharemarkets tumbling, but research house SuperRatings is urging super members not to make hasty decisions that could see them lock in losses.

The median balanced super fund option shed 8.9 per cent in March and fell 10 per cent over the quarter, while the median growth option, which typically has a higher exposure to shares, lost 12.5 per cent in March and 14.1 per cent over the quarter, according to the latest figures from the researcher.

“Our message for super members, especially those further from retirement, is stay invested if you can,” SuperRatings executive director Kirby Rappell said.

“Knee-jerk changes to your portfolio could have a negative effect on your retirement.

“Switching to cash will lock in losses and mean you miss out on the upside when the market eventually recovers,” he said.

While balanced and growth options erased most of 2019’s gains, the median capital stable option fared better amid the market turmoil, falling just 4.1 per cent in March and 3.8 per cent over the quarter.

Pension returns were also buffeted by the wave of selling, the SuperRatings figures showed.

The median balanced pension option fell 10.2 per cent over the quarter, while the median growth option fell 14.4 per cent. But the median capital stable option was down just 3.8 per cent.

“The only good news in March seemed to be signs of a relief rally as markets priced in the government’s fiscal stimulus packages and the Reserve Bank of Australia’s bond-buying program, along with similar efforts from governments globally,” the research house said.

“While more pain is expected, markets have already sold off heavily in response to the coronavirus and the measures taken to contain it.”

Switching to a more conservative investment option in the middle of a crisis can lock in significant losses and mean missing out on the upside when markets inevitably recover, the research house said.

The warning to take a long-term view of the investing cycle comes as hundreds of thousands of Australians prepare to draw down $10,000 from their superannuation funds when the scheme becomes operational in less than a week.

More than 600,000 people have already registered their interest in the scheme, which allows workers to draw down $10,000 this financial year and a further $10,000 between July and September.

The scheme, announced by Prime Minister Scott Morrison in March, aims to ease the burden on workers who have lost their jobs or have suffered reduced income due to the COVID-19 pandemic.

“The key thing is making sure that for those who need access to their super, that it’s there, but it should only be used as a last resort because the last thing you want to do is sell out at the bottom of the market,” Mr Rappell said.

The government is expecting about 1.3 million savers to ask for early access to their super savings and estimates about $27bn will be drawn down.