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How your super nest-egg grew by 17.5 per cent in record year

Business

Retirement is looking a lot better for many people with superannuation funds likely to produce their best performance in 24 years with an expected return of 17.5 per cent for the median growth fund, according to Chant West.

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It is likely to be one the best results of the compulsory super era, according to Chant West senior investment research manager Mano Mahunkumar.

He said in May the median growth fund returned 1.1 per cent for the month which led to an 11-month return of 15.7 per cent.

“And with markets up in June so far we estimate that, with about two weeks of the year remaining, the cumulative return is now sitting at 17.5 per cent,” he said.

“Should growth funds finish the year at or around the current level, it would represent the highest annual return in 24 years.

“The last time we saw a higher annual result was all the way back in 1996-97 when growth funds returned 19.4 per cent.

“The past two financial years really have illustrated the strength and resilience of our leading super funds.

“Despite the massive hit that COVID delivered to financial markets last year, the diversification built into growth funds enabled them to limit the damage, and the small loss of 0.6 per cent for the 2020 full year was far better than expected.

“And this year, with a little over 50 per cent allocated to listed shares, these funds have been able to capture a meaningful proportion of the upside as markets staged their remarkable recovery.

“The cumulative return since the COVID low point at end-March last year is now about 25 per cent, which is amazing given the chaos the world was thrown into by COVID-19.

“We’re now sitting about 10 per cent above the pre-COVID crisis high that was reached at the end of January 2020.

“May was another good month for share markets, which are the main drivers of growth fund performance. Australian shares were up 2.3% while international shares were up 1% in hedged terms and 1.2% unhedged.

Notably, both the Australian and US market indices reached all-time record highs during the month.

Meanwhile, contentious superannuation laws have cleared the Senate with the support of One Nation and Jacqui Lambie.

But the federal government was forced to delay the changes until November 1.

Currently, workers often unknowingly open many small accounts and get signed up to default insurance, attracting multiple fees.

From November, workers will be “stapled” to their existing super fund when they change jobs.

“Let’s not forget that Australians pay more than $30 billion in superannuation fees and charges every year,” Treasurer Josh Frydenberg said on Thursday.

“Yet many Australians don’t know the amount they have in super or indeed that it is their money to access.”

He said the overhaul of the $3.2 trillion superannuation pool will save consumers more than $17 billion.

The “Your Future, Your Super” bill also benchmarks performance and shuts down access to poorly performing funds.

But critics say the law traps millions of people in dud products, including super funds slammed for dodgy dealing by the banking royal commission.

The Industry Super Australia organisation said the government has given poor super products a leg up at the cost of the workers they are fleecing with their high fees and lousy performance.

People in blue-collar jobs or people working in new riskier jobs may not be covered by their old insurance.

“Young workers who will move into hazardous sectors like building and construction deserve superannuation legislation that recognises their unique needs,” Cbus chief executive Justin Arter said.

A proposed review by Treasury will examine occupational exclusions in insurance.

Labor opposed the changes and independent senator Rex Patrick failed to extend performance tests to more retail super products during the hard-fought final two days of debate.

The government had already removed a contentious veto power for the treasurer over funds’ investment decisions.

-with AAP

 

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