It’s a very human need to want to know how you are doing compared with other people of your age and stage. It’s not the same as ‘keeping up with the Joneses’ which is a more competitive, status-driven urge. Knowing where you sit in the pecking order is very useful. This knowledge might be associated with aspects of health, wealth, education or work achievements. Humans love to know how they are performing and it’s no different when it comes to investment performance. Many retirees keenly track stock exchange information so they know how their investments are performing. Homeowners usually have a keen interest in their neighbourhood’s property prices. Even vintage car owners like to know what their make and model is now worth.
But what about super?
The funny thing about superannuation is that many people simply do not know, from year to year, how their super savings are performing. What’s so different about super you might well ask? It’s a question that many financial services experts have also pondered. We know that engagement is low because the data tells us that only about 44% or Australians with super bother to open, let alone read, their annual super statement.
If this is you and you are retired or planning to be so soon, this is not good practice. With most Australians holding more than $210,000 in super savings as they approach retirement, not understanding your super’s earning capacity, fees charged or relative performance amounts to really taking your eye off the ball.
Today we are sharing a ‘scoop’, a projection by independent ratings agency, SuperRatings, on the expected returns for both pension and accumulation funds for the 2023-2024 financial year. The final results will not be published until July 20, as some funds take a little longer to finalise valuations. But the following table reveals up to 25 June 2024, how the different sectors have performed over the 12-months period.
| Index | Effective | Monthly | FYTD | CYTD | 1 year annual return | 3 year annual return p.a. | 5 year annual return p.a. | 7 year annual return p.a. | 10 year annual return p.a. |
| PENSION FUNDS | |||||||||
| SRP50 Balanced (60-76) Index | 25/06/2024 | 1.0% | 10.0% | 5.7% | 10.0% | 5.3% | 6.9% | 7.5% | 7.9% |
| SRP50 Capital Stable (20-40) Index | 25/06/2024 | 0.8% | 6.4% | 3.0% | 6.4% | 2.9% | 3.7% | 4.3% | 4.9% |
| SRP50 Growth (77-90) Index | 25/06/2024 | 1.0% | 11.8% | 6.8% | 11.8% | 6.0% | 8.2% | 8.8% | 9.1% |
| ACCUMULATION FUNDS | |||||||||
| SR50 Balanced (60-76) Index | 25/06/2024 | 0.9% | 9.0% | 5.0% | 9.0% | 4.7% | 6.2% | 6.7% | 7.1% |
| SR50 Capital Stable (20-40) Index | 25/06/2024 | 0.7% | 5.7% | 2.6% | 5.7% | 2.6% | 3.3% | 3.9% | 4.3% |
| SR50 Growth (77-90) Index | 25/06/2024 | 1.0% | 10.6% | 6.2% | 10.6% | 5.6% | 7.5% | 8.1% | 8.3% |
How can you read this information?
This chart offers a very useful ‘yardstick’ by which you can measure your own fund’s performance. As you can see it is divided into two sections, Pension Funds and Accumulation Funds. Here’s a brief explainer.
Pension Funds
Pension funds is the name with which many in the superannuation industry refer to funds that have been rolled over into spending (or decumulation ) mode. This generally happens when someone:
- Reaches age 60
- Accesses their super by moving all or part to an Account-Based Pension (ABP) which makes regular income payments
Account Based Pensions generally generate higher returns than accumulation funds as there is no tax on earnings. For example the 10 year return for the Pension Balanced Index is 7.9% whereas it is only 7.1% for the Accumulation equivalent. That can make a substantial difference to your wealth and income in retirement. An Understanding Super consultation can help to identify if moving your super from accumulation to an Account Based Pension might benefit you.
Accumulation funds
These are the funds to which contributions are made by your employer or yourself when you are saving for retirement – i.e. before you reach Age Preservation age and access funds via a retirement income stream as described above. So in essence, this is when you are in ‘saving’ mode.
What do the three different SuperRatings indices mean?
The SuperRatings indices are custom indices designed and maintained by SuperRatings to represent the broader Australian superannuation landscape. Indices labelled with SR represent accumulation accounts while SRP represents pension accounts. The value given for the index is the median return across the options included in the index. The values in the brackets represent the growth asset allocation of the options:.
- the capital stable index has 20-40% in growth assets,
- balanced has 60-76% and
- growth has 77-90% in growth assets. These assets represent riskier investments and likely higher long term returns for growth over balanced or capital stable.
So, the SRP50 Balanced (60-76) index, for example, is the median performance across a representative selection of 50 pension investment options with growth assets between 60-76%.
What if your fund is returning a higher amount than those in the table?
That’s great news. But don’t just pat yourself on the back and shout yourself a meal out. The interesting questions to ask are all in your year-end super statement. How much did your savings increase during the past 12 months? How much did you keep after fees? Are you comfortable with your current risk settings? If your super remains in accumulation, are you sure that the extra tax you are paying is the best strategy? Or is it time to consider rolling it over to an Account Based Pension?
And what if your returns are lower?
Any summary of median returns means that some people will receive lower amounts, others higher. The key questions start with whether you are happy with your fund, the support it offers you and that you are comfortable your savings are secure.. Look at your investment level and consider if it still suits your age and life stage. Consider calling your fund and ask to speak to someone who can explain to you why returns are lower than the projections. This is a useful exercise at any time. As above, also consider if it is still in accumulation if it is time to make a change.
What next?
Are you ready to engage more actively with your super savings and to make them work harder for you? Knowledge is power in this case. That’s why Retirement Essentials designed the highly popular Understanding more about your super consultation. In this meeting an adviser will guide you through the rules, your options and some of the many ways to ensure you are fully maximising your savings.
Do you read your super statement?
Or is there other information that you find more helpful?
Just wondering why theres no mention for those punters who have funds @Conservative option?
Does RE have access to those results or don’t they matter?
Hi Rod, many thanks for your question. We checked with SuperRatings and they reminded us that many funds call their investment options by a range of different names, and it can be difficult to pinpoint the actual investment mix from a name. That said, the Capital Stable option is probably closest to what may be termed ‘conservative’ although there are different nuances depending upon your fund. What you can do is to check the growth asseets in your fund and then compare them with growth assets as reported and explained in the table in the article. I hope this assists, warmest, Kaye