Take the long-term view on super
Super funds boomed last calendar year. But you need to think about average gains and losses when making your super retirement plans.
Australian superannuation funds posted positive returns in 10 of the 12 months in 2024, many in double digits.
That’s good news for retirees, many of whom will be enjoying a more comfortable retirement in 2025 as a result.
International shares were the standout performer in 2024, led by strong growth in US shares. Despite a disappointing December return, Australian shares also contributed double digit returns over the year.
Returns were further enhanced by strong property and infrastructure asset returns, while fixed interest and cash returns provided a more modest but still helpful mid-single-digit return.
The real winners were investors in pension-phase funds – with better returns than those funds in the savings phase. This is in addition to the pension phase tax advantages.
The median growth fund (61% to 80% in growth assets) returned 11.4%, with higher risk portfolios faring even better.
Finance research agency, Chant West, found the 11.4% growth fund return came on the back of a strong 2023 return of 9.9% and represents the 12th positive return in the past 13 years.
It is also well ahead of the typical long-term return objective of approximately 6% per annum. Prudent investors would now be factoring into future planning the likelihood of a year or two of negative returns.
Super Ratings observed the importance of assessing super performance over the longer term and the power of super over other categories.
Chant West senior investment research manager, Mano Mohankumar, cautions retirees to factor into their planning the inevitability of risk.
“The typical long-term return objective for growth funds is to beat inflation by 3.5% p.a., which translates to just over 6% p.a. Since the introduction of compulsory super, the annualised return is 8% and the annual CPI increase is 2.6%, giving a real return of 5.4% p.a. – well above that 3.5% target.
“Even looking at the past 20 years, which includes three major share market downturns – the GFC in 2007-2009, COVID-19 in 2020 and the high inflation and rising interest rates in 2022 – super funds have returned 7.1% p.a., which is still comfortably ahead of the typical objective. Returns are important but so is risk …”
Related reading: Retirement Essentials, SMH, Chantwest
Disclaimer
This article and any links provided are for general information only and should not be taken as constituting professional advice. National Seniors is not a financial advisor. You should consider seeking independent legal, financial, taxation or other advice to check how any information provided relates to your unique circumstances.
