Mt Druitt - St Mary's Standard (East) - - FRONT PAGE - Brooke Wil­liamson

The Aus­tralian su­per­an­nu­a­tion in­dus­try is in­te­gral to the econ­omy as it forms an im­por­tant part of house­hold and na­tional sav­ings.

It has be­come the largest as­set out­side of the fam­ily home. Put sim­ply, when su­per per­forms well, we all ben­e­fit.

The funds un­der man­age­ment in the Aus­tralian su­per­an­nu­a­tion in­dus­try make it the third largest pri­vate pen­sion fund mar­ket glob­ally be­hind the United States and United King­dom.

It ac­counts for 24 per cent of to­tal Aus­tralian fi­nan­cial in­sti­tu­tion as­sets, putting its share se­cond only to that of Aus­tralian banks.

How­ever, ac­cord­ing to a KPMG study con­ducted last year, th­ese lev­els will start to fall as more Baby Boomers start to draw down on their con­tri­bu­tions in the next 10 to 15 years.

“Given the in­crease in pen­sion mem­bers, we be­lieve pen­sion in­no­va­tion is im­por­tant, both in re­la­tion to the prod­uct of­fer­ing and im­prov­ing the risk man­age­ment within the prod­uct to in­crease the cer­tainty of out­comes,” the re­port says.

Over­all, the Aus­tralian su­per­an­nu­a­tion in­dus­try has per­formed mod­estly over the past few years, with in­vest­ment per­for­mance for the me­dian growth su­per funds de­liv­er­ing their fourth straight pos­i­tive cal­en­dar year re­turn, ac­cord­ing to rat­ing com­pany Chant West.

A great in­vest­ment per­for­mance for one year does not cre­ate a healthy re­tire­ment bal­ance over time. And a bad in­vest­ment year does not de­stroy years of pos­i­tive growth.

In­de­pen­dent fi­nan­cial plan­ner and for­mer char­tered ac­coun­tant Michael Radalj, from Your Pri­vate Ad­vis­ers (your­pri­vatead­vis­ers.com.au), says many peo­ple make the mis­take of not un­der­stand­ing the ba­sics of how their fund works.

“Peo­ple need to look at their su­per and un­der­stand the im­pact of fees as well as the per­for­mance,” he says.

“The in­vest­ment per­for­mance of so-called bal­anced funds of­ten re­flect the eco­nomic con­di­tions fac­ing Aus­tralia.”

“Many peo­ple don’t un­der­stand what they’ve got and they make knee-jerk re­ac­tions, for ex­am­ple the stock mar­ket falls and they blame the in­vest­ment fund for the fall.”

Head of Chant West re­search Ian Fryer agrees.

Fryer says su­per fund mem­bers should think care­fully be­fore rush­ing to try to “time the mar­ket” to switch their su­per into a more con­ser­va­tive strat­egy.

“The prob­lem is that no one re­ally knows the right time un­til months later and then it’s too late,” he says.

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