Superannuation Super Report: Things Aren’t Looking So Hot

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Chant West has predicted that superannuation fund members will experience negative returns this year – the first time since 2011 – and inflation could further compound their suffering.

As Mano Mohankumar, the group’s lead researcher, commented, December’s somewhat erratic stock market activity caused a general decline in overall performance.

By the end of November, median growth funds with 61 to 80 per cent in growth assets had declined 2.7 per cent this year and are expected to be down 4 per cent overall by the year’s end.

“It is important to remember that this year’s modest decline follows a remarkable 2021, where the median growth fund achieved an impressive return of 13.5%.” Mr Mohankumar said.

“Despite the COVID-19 crash that saw average mutual funds plunge 12% within two months, 2020 ended with a remarkable 3.6% return due to the powerful rebound later in the year,” he said.

The recovery has been so powerful that the average growth fund is more than 11% above its pre-COVID peak established in January 2020.

According to the Association of Superannuation Funds of Australia, an average balance is estimated at $145,670. However, if Chant West’s predictions are accurate and values finish 2022 down 4%, that number could drop by a staggering $5286 throughout 2021.

Alex Dunnin, the research director of Rainmaker, warns investors to remain vigilant in an inflationary environment.

“Though funds might have dropped 4% due to inflation, your total loss is an alarming 10%. We can only hope that the coming year will bring much-needed improvement.” Mr Dunnin said.

Even so, the potential of inflation, an energy crisis and rising interest rates could make it more difficult to generate positive returns in the upcoming year.

“Upon glancing at these figures, some members may feel apprehensive and overwhelmed.” Mr Dunnin said.

Members experiencing high returns and minimal inflation for an extended period may need more clarification on their fund’s performance. With the proper attention, people might realise if it is underperforming compared to its historical averages.

Therefore, analyse your super fund returns thoroughly when receiving them and make alterations if they are underperforming.

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