26 June 2020
ASFA: Super funds claw back COVID losses to finish flat, outperform international peers
Superannuation funds have delivered substantial benefit to members in the 2019-20 financial year, despite the most challenging investment and employment conditions in recent memory, according to The Association of Superannuation Funds of Australia (ASFA).
The average balanced investment option has recouped losses caused by the COVID-19 crisis, which initially wiped 15 per cent from the value of the average portfolio, to yield a flat annual return.
ASFA CEO, Dr Martin Fahy, said: “It’s a remarkable feat for funds to reverse the significant losses anticipated in March and April as the Australian share market fell 37 per cent from peak to trough”
“After a decade of strong, and in some cases, double-digit investment returns, super funds’ diversified investment strategies continue to deliver for the benefit of members, amid hugely difficult global conditions.”
Fund members in default investment options have also done well over the longer term. For a person aged 35 at end-December 2010 with a then superannuation balance of $35,000 and earning average wages over ten years, they would have had a balance at end-December 2020 of $140,000. This is based on the fund average real return of 5.8 per annum in real terms, with nominal investment returns adjusted by the increase in the CPI over the period.
The performance of Australian superannuation funds is remarkable when compared with pension funds in other countries. (See table in attachment) The annual real return over 5 years to December 2019 for Australian superannuation funds was 6.3 per cent and over ten years it was 5.8 per cent. In comparison, the equivalent average real return figures for the United States were 2.1 per cent and 3.0 per cent.
ASFA analysis indicates that Australians have also benefitted from superannuation in other ways over the financial year:
- Around 2.5 million Australians will have benefitted from early release payments, averaging around $7,500 each and totalling around $18.5 billion.
- Funds paid out around $8 billion in insurance claims for death and disability.
- Funds other than SMSFs paid out around $44 billion in lump sum payments and $42 billion in pension payments over the year.
Attachment A
Investment returns in Australian superannuation funds relative to pension funds overseas, average per year in real terms to 30 December 2019
| 5-year | 10-year | |
|---|---|---|
| Australia | 6.3 | 5.8 |
| Netherlands | 4.7 | 6.2 |
| Denmark | 4.3 | 5.3 |
| Canada | 4.1 | 5.1 |
| Israel | 5.1 | 5.0 |
| Iceland | 5.1 | 4.7 |
| Belgium | 3.7 | 4.3 |
| Norway | 2.9 | 3.9 |
| Chile | 3.8 | 3.7 |
| Slovenia | 2.8 | 3.3 |
| United States | 2.1 | 3.0 |
| Mexico | 1.0 | 2.5 |
| Spain | 1.7 | 2.3 |
| Austria | 1.9 | 2.1 |
| Italy | 1.9 | 2.1 |
| Portugal | 2.3 | 1.8 |
| Latvia | 0.5 | 1.6 |
| Estonia | 0.9 | 1.2 |
| Slovak Republic | 1.1 | 0.7 |
| Czech Republic | -1.0 | -0.2 |
| Turkey | -0.5 | -0.5 |
Source: OECD Pension Funds in Focus http://www.oecd.org/pensions/pensionmarketsinfocus.htm
Chant West performance figures for Australia, adjusted by CPI growth over the relevant periods
For further information, please contact:
Jacqui Maddock, 0451 949 300.
About ASFA
ASFA is the peak policy, research and advocacy body for Australia’s superannuation industry. It is a not-for-profit, sector-neutral, and non-party political, national organisation. ASFA’s mission is to continuously improve the superannuation system, so all Australians can enjoy a comfortable and dignified retirement.
