7 September 2018
10 years on from the GFC – Superannuation still a safe, long-term harbour for savers
The ten year anniversary of the collapse of Lehman Brothers falls on 15 September.
It was a bankruptcy that would accelerate the impending global financial crisis (GFC) and wreak havoc across financial institutions and economies around the world. The All Ordinaries Index fell by 54 per cent from October 2007 to March 2009.
Ten years on ASFA CEO Dr Martin Fahy said it was worth examining how superannuation members have weathered the worst ravages of the GFC.
Even with the benefit of diversification of investments, the typical member in a balanced investment option in their superannuation saw their balance fall by around 20 per cent between 1 July 2007 and 30 June 2009.
“As the tenth anniversary of the Lehman Brothers collapse approaches, it’s worth asking where is my super and how has it fared?
“For the typical fund member who remained in a balanced option, over the ten year period to June 2018 investment returns have added more than 85 per cent of the original balance over the past 10 years, while members in growth options have seen their savings grow by more than 90 per cent, even without further contributions.
“An individual who sought to avoid any risk at all by investing in cash would have fared much worse, being up only 40 per cent over the 10 year period.”
For example, a person with a $100,000 balance in a cash option in 2008 would now have $140,000. Those who went from balanced to cash in 2009, at the bottom of the market, as a result of the GFC would have fared even worse.
They would be up only around 10 per cent over the ten years from 2008 to 2018. Their $100,000 balance would have only increased to $110,000 by 2018.
Dr Fahy said that over the last five years, a cash option in superannuation had delivered only about two per cent per annum, while the typical balanced option has delivered between 9 and 10 per cent per year on average.
“Super assets are generally diversified across a range of categories and it is this diversification that enables individuals to weather volatility in the price of specific asset classes like shares,” he said.
Table: Asset allocation of superannuation funds other than SMSFs
| Asset class | % of total assets |
|---|---|
| Cash | 10 |
| Fixed interest | 21 |
| Australian listed shares | 23 |
| International shares | 24 |
| Unlisted equity | 4 |
| Property | 8 |
| Infrastructure | 5 |
| Hedge funds | 2 |
| Other funds | 3 |
| Total | 100 |
Note to Editors: Dr Fahy is available for interviews today and over the weekend.
For further information, please contact:
Katrina Horrobin, 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.
