The negative superannuation returns most funds experienced in FY 2021/22 were largely caused by drops in the values of Australian and international shares. These sharemarket falls in turn were caused by factors including rising inflation, interest rate hikes and international events like the war in Ukraine.
Your super balance changes every day, fluctuating with the value of investment markets as investors buy and sell: it's the normal way markets function. Today we're more aware of these changing values now we can log in to our superannuation accounts and see the balance daily.
The latest measure of total super in Australia is from September 2022 ($3.3 trillion), but at the end of December 2021 there was around $3.5 trillion in super. Mr Dunnin says the overall 4.3 per cent loss in 2022, converts to a hit of about $150 billion.
Superannuation performance
Most funds produced negative returns, with performance across the top ten funds ranging from -3.6 per cent to 1.7 per cent. Strategies with a larger proportion of unlisted assets across infrastructure, property and private equity performed better.
Superannuation assets increased by 1.1 per cent over the past year to around $3.5 trillion at the end of March 2023. This reflected a rebound in financial markets over the December 2022 and March 2023 quarters and continued strong contribution inflows.
Super guarantee (SG) increase
From 1 July 2023, the super guarantee increases from 10.5% to 11%. Further increases of 0.5% are scheduled each financial year until 2025 when the rate reaches 12%.
From 1 July 2023, the Super Guarantee will increase to 11%. It will continue to increase by 0.5% on 1 July each year until it reaches 12% in 2025.
Canstar crunched the numbers for the top super funds that have reported returns so far and found that the average one-year return of balanced funds is sitting at -3.67%. That means people in the 35 to 44 age bracket with an average balance of $76,084 would have potentially lost $2,792.
Positive investment option performance
The Balanced investment option, over the last 10 years to 31 March 2023, has delivered an average return of 8.71% each year for super accounts and 9.56% each year for Choice income accounts. AustralianSuper has a strong track record as a top performing super fund.
Does a share market fall mean that I have lost my super? If your investment mix includes shares, a fall in share markets will likely reduce the unit price of your super and hence your account value. This is not necessarily cause for panic, as your number of units will not have changed.
This means that while shares might be falling, other assets will be doing well. So even if the share market has fallen 20%, the overall impact on your super won't be as significant. This is because the portion invested in other assets (like gold, bonds or property) will help outweigh some of this loss.
Important: Superannuation is primarily a long-term investment. Don't be too concerned about a negative month here or there because on average super funds have been providing positive returns for 25 of the last 30 financial years.
Superannuation has a strong reputation as a secure and well-managed investment so, for the most part, you can rest easy that your super is in safe hands. However it is worth monitoring your super to ensure a) that you get what you are entitled to and b) that you act on any suspicious activity early.
The best super investment mix will usually have exposure to Australian shares, international shares, property, fixed interest, cash and possibly alternative assets such as infrastructure, commodities and private equity.
Consider making a one-off super contribution
Contributing to super can be a tax effective strategy as earnings for investments held within super are taxed at up to 15%. This can compare favourably to investment earnings earnt outside super which are taxed at your marginal tax rate.
In its annual awards ceremony on 17 May 2023, Chant West named UniSuper as its Super Fund of the Year for the second year running. In 2022, its first year as a public offer fund, UniSuper won the top all-rounder gong awarded by both Chant West and SuperRatings.
This obviously depends on what annual income you want to fund but if you want to be able to afford a comfortable retirement—which is an income of just over $48,000 a year for a single according to the ASFA Retirement Standard—then you need a balance of at least $500,000.
Assume, for example, you will need 65 per cent of your pre-retirement income, so if you earn $50,000 now, you might need $32,500 in retirement.
2) How much do I need to retire on $80000 a year? We will assume you are single, retire at age 65 and want funds to last until age 90. You need approximately $1,550,000 by retirement at 65 to live on $80,000 (indexed up each year for inflation) according to the Moneysmart Retirement Calculator at this present time.
The SG requires employers to pay 9.5 per cent of an employee's earnings into their superannuation fund. From July 1, 2021, the SG is legislated to rise in half per cent increments each year until it reaches 12 per cent of wages in 2025.
Superannuation Guarantee
The rate of compulsory super that employers must pay eligible workers rises from 10.5% to 11% from 1 July 2023. Under the current legislated timetable, the Super Guarantee (SG) rate will continue to rise incrementally by 0.5% each financial year to 12% by 1 July 2025.