Australian superannuation fund members can take heart from the fact that, generally speaking, they have been doing better than their British counterparts.
While most Australian superannuation funds turned in double digit performances last financial year, the latest data for the United Kingdom from the European performance measurement division of State Street, WM Performance Services, points to only solid single digit returns.
The WM quarterly pension fund survey released this week showed that pension funds in the UK had picked up after a subdued first quarter to post second-quarter returns of 5.2 per cent boosting year to date returns to 7 per cent.
The survey analysis said that a combination of better investment returns and generally increased employer contributions were starting to close the funding gap which exists in many of the UK’s defined benefit schemes.
It said that for the quarter both UK and Continental Europe equities posted returns of 4.7 per cent, while better North American equity returns of almost 7.7 per cent to the sterling investor were mostly due to dollar depreciation.
Commenting on the survey findings, WM Performance Services Senior Consultant, Graham Wood said the absolute value of the average fund had recovered to its pre-cash (end of December, 1999) level.
“This is good news, but the pension problem still exists – simply looking at the growth in assets misses the point that the cost of providing pensions is linked to bond yields and better life expectancy,” he said. “So while we expect that there has been some recovery in funding levels, the majority of funds will still be trying to close the gap.”
