As they start preparing their annual returns, many funds must be sighing with relief. Despite all the negative reports, the Association of Superannuation Funds of Australia (ASFA) says up to 70 per cent of Australian workers will receive positive returns on their super for the past financial year, ranging from 1.5 per cent to 4 per cent.
According to ASFA, almost all of the top 10 largest industry funds and many public sector fund accumulation plans have recorded gains for members. Indeed, REST Superannuation, Australia’s largest industry fund, says it will credit 4 per cent interest to 98 per cent of its 1.3 million members. Preliminary results also show that Host Plus’s balanced option has returned 4.1 per cent for the year while Care Super’s default balanced option has edged up 4 per cent.
Still, at a time when super fund outsourcing is escalating rapidly in the wake of growing regulation, it is worrying why retail funds and master trusts have not matched the performance of not-for-profit super.
According to ASFA, preliminary estimates for retail super funds suggest an average investment return of -2 per cent, with only a minority delivering a positive return, the best of which is around 3 per cent.
ASFA says likely reasons for this are higher administration and investment costs and the possibility that a larger proportion of assets are allocated to domestic and international shares in the retail funds.
Of concern, too, is that many members in default options can also expect red splashed all over their annual statements. Mercer Investment Consulting’s data shows that balanced and growth options with 70 per cent or more allocation to shares and property — typically those set as a default — will end the financial year in the red. The median in the Mercer Pooled Fund Survey — a measure of both balanced and growth fund performance — recorded minus 2.4 per cent for fiscal 2002-03.
Its been a hard two years on the investment front. Both fund executives and members have felt the pain, but, hopefully, some important questions have been raised for all, including the Government, to consider in the year ahead.
