How to respond to 12-month returns

Superannuation research house SuperRatings has released the financial year returns for Australian super funds – and Account-Based Pensions. These rankings are useful in many ways. First and foremost, we have a clear idea of the top performing funds. And how much they returned to members over the past 12 months.

We can also measure whether our own funds are performing in a respectable way, by comparison, or whether they might be lagging behind.

It’s also instructive to see the overall performance of all funds – the annual, 3-year, 5-year, 7-year and 10-year returns according to assets under investment. 

But even more important than highlighting rankings and increases, Kirby Rappell, Executive Director of SuperRatings, suggests how retirees might respond to these findings.

What was the annual return?

The annual return of super funds (July 1 2022 – June 30 2023) was 8.5%. This was a dramatic reversal of the annual loss of -3.4% in Financial Year 2021-22, meaning a 12% turnaround. Kirby Rappell notes:

“While there are significant conversations about interest rate rises, inflation and global uncertainty front and centre within the economy, it is reassuring to see superannuation funds’ ability to deliver a competitive outcome for everyday Australians.”

Kirby Rappell - Super Ratings
Kirby Rappell, Executive Director of SuperRatings

How should retirees view this almost 12% turnaround? 

“While the current Cost of Living is certainly putting pressure on many Australians, superannuation continues to play its part for people’s longer term financial outcomes.

Economic pressures can be hard to ignore. But superannuation continues to perform well on a long-term basis with most funds managing to keep performance in line with the typical CPI+3.0% investment objective over 10 and 30 years. We expect funds may struggle to meet their inflation plus objectives over the short term, particularly as inflation remains elevated; however, super funds have done well to capitalise on the opportunities available to ensure members’ super account balances continue to grow.” 

Does this offer reasonable expectations for future returns?

It depends. Not all super is the same – even within your own fund. The SuperRatings report also measures the different returns from Balanced, Capital Stable and Growth indexes. As you can see in the table below, there was a marked difference in performance with balanced settings returning 8.5%, capital stable (holding traditionally defensive assets such as cash and bonds) returning 4.5% and the Growth index showing an 11.1% increase over the Financial Year.

Accumulation returns to June 2023

 Monthly1 yr3 yrs (p.a.)5 yrs (p.a.)7 yrs (p.a.)10 yrs (p.a.)
SR50 Balanced (60-76) Index1.2%9.0%7.5%5.8%6.9%7.4%
SR50 Capital Stable (20-40) Index0.3%4.6%3.1%3.1%3.7%4.5%
SR50 Growth (77-90) Index1.4%11.2%9.1%6.9%8.3%8.7%

Source: SuperRatings estimates

What does this mean for you?

It’s a timely reminder at the beginning of a new Financial Year to check your settings. This means where and how are you invested. Let’s say you are 65. In all likelihood, you will live to 90 and beyond. So if you need your super to fund another 25 or more years, holding only defensive assets may not keep pace with inflation, resulting in faster drawdowns.

But wait, there’s more

Another handy piece of information released by SuperRatings is the performance of Account-Based Pensions, based upon the returns of some 170 funds. Again, these returns were categorised as Balanced, Capital Stable or Growth. And again, there was a significant difference in performance as evidenced in the table below. Whilst the overall return for accumulation funds  was 8.5% that delivered by these Account-Based Pension funds (i.e. decumulation or ‘retiree’ funds) in the balanced index was 9.8%. Bearing in mind that inflation currently sits at 7%, this represents a very strong performance. A major reason for the particularly strong performance of account based pensions is that the investment earnings are tax free.  If you haven’t already moved your super into an account based pension you might want to consider talking to an adviser about whether it could be a good option for you.   

Account-Based Pension returns to June 2023

 Monthly1 yr3 yrs (p.a.)5 yrs (p.a.)7 yrs (p.a.)10 yrs (p.a.)
SRP50 Balanced (60-76) Index1.3%10.0%8.2%6.4%7.8%8.3%
SRP50 Capital Stable (20-40) Index0.4%5.2%3.6%3.5%4.2%5.1%
SRP50 Growth (77-90) Index1.7%12.2%9.8%7.5%9.2%9.5%

Source: SuperRatings estimates

Long term thinking helps

“Despite the strong performance over the past year, we suggest members remain active, and review their longer-term settings, such as whether they are in the most appropriate investment option for their situation and to check their fees, when they check their annual statements.” Mr Rappell commented.

 “Twelve months ago, we did not anticipate an 8% return for this year. Many people would see this as a positive. Long term returns remaining strong. However, we expect the ups and downs observed over the last 12 months to continue and members should be prepared for their balances to fluctuate. If you are not approaching or in retirement, keep in mind that all market movements in the short term are not likely to be what you are thinking about when you retire in 20 or 30 years’ time.”

Medium Balanced Option Financial Year Returns Since Introduction of Compulsory SG

How to support long term goals for your super

Says Mr Rappell, “Those in their mid-60s probably have many years ahead of fthem. Helping them to withdraw super in a sustainable manner is the real challenge for super funds. Better retirement income products will be useful. But this can be a regulatory minefield. And each person’s retirement income ‘recipe’ will be different. Another key challenge is making such options understandable.”

What are the most useful short term actions?

“The first action,” suggests Mr Rappell, “is to try to avoid worrying day-today. Instead taking a longer term view and knowing your own risk tolerance is critical.

Then asking, does your ability to tolerate risk match your current fund settings? Perhaps try a risk profiling tool to see if you are overly conservatively invested.

Next check if your fund is measuring up. And how flexible your pension fund is.

Check that pension fund payments conform to your lifestyle and cashflow needs. And of course, how your fees compare.”

And finally, those who think long term will be heartened to be reminded that since the inception of mandatory superannuation in 1992, the average fund return has been 7.2%. This is a strong number. Staying engaged with your finances and up to date with changes is the greatest favour a retiree can do themselves.

SuperRatings is a superannuation research house with specialist areas of expertise originally established in 2002. A full range of superannuation rankings and reports can be found on the website

If you would like to understand more about your super and the options available to you, you can read more here.

This article is provided by Retirement Essentials Representative Number: 001260855. We are an authorised representative of SuperEd Pty Ltd ABN 88 118 480 907 AFSL #468859. This information is not intended as financial product advice, legal advice or taxation advice. It does not take into account your personal situation, goals or needs and you should assess your own financial situation, consider if the information is suitable for you and ensure you read the relevant Product Disclosure Statement (PDS) if you choose to make any changes to your financial situation. It is always advisable to consult a financial adviser before making financial decisions.