Australians Face Steepest Retirement Savings Crisis Since GFC

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The holiday season has been unkind to Australian superannuation returns, as the share market’s decline before Christmas proved more severe than initially expected.

According to SuperRatings, the median balanced fund is projected to experience a 4.4% decline.

Recently, analysts forecasted a 2.7% decrease in economic activity for the entirety of 2020. This outcome would make it the lowest-performing year since 2008 during the Global Financial Crisis, where we saw a 19.7% collapse!

After a decade of growth, 2022 is the first year with a number drop. The forecasts for 2022 are both worse than the 1.9 per cent decline that happened in 2011, which was a year when Australia encountered its first economic recession since 1991.

Kirby Rappell, Executive Director of SuperRatings, recently announced that super returns for 2022 are expected to decrease more than initially predicted, mainly due to a discouraging December share market.

“Super fund members are in for a let-down, as the absence of a Santa rally is going to bring about considerable disappointment this year,” he said. “Therefore, it’s become more apparent that prudent risk management should be at the forefront of everyone’s minds when considering their super funds in 2022.”

As calendar 2022 entered its first half, investors were left disappointed with a 7.4% decrease in their returns as the possibility of increased rates around the world dampened their enthusiasm. Global markets have proven particularly troublesome for these numbers; equity, property and fixed interest investments are expected to all finish the year in negative figures. According to Mr Rappell, this has been “a key drag on returns”.

Despite a positive return of 3.2 per cent in Australian superannuation balances from July to December 2022, the overall outcome for that calendar year was still negative.

“Although the market might experience some temporary volatility, it is essential to remember that since 1997 — which included the dot-com bubble, Global Financial Crisis and Covid pandemic – there have only been four calendar years of negative returns,” Mr Rappell said.

The Reserve Bank predicts that annual inflation will soon surge to eight per cent by the end of December – a rate not seen since 1990. Mr Rappell asserted that 2023 would likely bring more uncertainty.

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