A WEALTH CHECK-UP
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.