Super picks up after the shocks

Although damaged by two recent shocks, Australia’s superannuation funds have been doing their job, according to a new report.

The report, published by the respected assessment firm, SuperRatings, says mid level balanced funds have produced average returns of 6.8 per cent a year, over the past seven years.

But prices had risen by just 2.8 per cent a year over that time.

“This means that “most funds are meeting their long term objectives,” SuperRatings said.

But – as the old song warns – the fundamental things still apply – as time goes by.

SuperRatings acknowledges that reality, saying there is still a basic trade-off between long term returns and short term volatility with super.

The first of the two shocks came when the former Treasurer, Peter Costello cut tax favoured superannuation contribution limits from $50,000 a year to $25,000 in 2007-08.

Australians responded by cutting voluntary contributions to their superannuation funds by 40 per cent.

But there was an even bigger shock to come, with the share market crash.

That left many newly retired people with much smaller superannuation payouts than they had expected.

Once again, Australians reacted angrily, cutting their voluntary superannuation contributions by another 40 per cent.

So can Australia’s superannuation funds,  win back the hearts, minds and voluntary contributions of their clearly disgruntled members?

That’s an important question as they still have a massive $1.2 trillion of Australian retirement money in their care.

Public anger over these shocks remains high.  It will take some time yet to subside, even if all goes well for the industry, in the immediate future.

There is some good news, though.  The Federal government already has a sweeping overhaul of the industry, well under way.

That will certainly raise suspicions, at least initially.  The public  already believes that governments can’t keep their hands off the rules that govern super.  That sits badly with what, after all, is essentially meant to be  a long term investment.

Even the industry’s best friends, though, don’t argue that Australia’s super funds have been as nimble, at times,  as they should have been.

At long last, too, the funds have been  finally chalking up some good numbers, that have – at least partly – offset the terrible ones that came with the crash.

SuperRatings tells the story.

“After experiencing their worst year on record in 2008, with average losses close to 20 per cent, Australia’s major super funds have staged a remarkable recovery in 2009 to post a positive 12.9 per cent return,” it says.

SuperRatings said this was largely due to “a surging Australian share market, “which had produced a record gain in the second half of the calendar year.

So which funds have been the top performers?

SuperRatings gives Commonwealth Bank’s Officers’ Superannuation Fund – a corporate – the top spot, saying its Super-Mix 70 balanced fund had produced average returns of 6.8 per per annum over the past five calendar years.

An industry fund, for Queensland’s building workers, BussQ, took second spot, with a similarly calculated average of 6.5 per cent.

There’s more at www.superratings.com.au