Australia’s run of double-digit superannuation returns has continued in 2013-14, buoyed by a strong performance from the local and international stocks.
Balanced super funds closed the 2013-14 financial year on a high, with median gains of 12.7 per cent, according to data from SuperRatings.
This follows on from last financial year’s near record 14.7 per cent return and is the seventh highest returns on record since compulsory super was introduced in 1992.
Australia’s largest corporate fund, Telstra Super, was the highest performing super fund with its balanced option returning a profit of 15.8 per cent.
Telstra Super also leads the way in the top balanced options over the past five years, with a return of 10.7 per cent, narrowly pipping REST – Core Strategy at 10.6 per cent.
The median return for funds over five years is 9.2 per cent.
These figures were supported by research provider Morningstar, which figure showed the average returns by for-profit and industry superannuation funds at “a healthy 12.9 per cent”.
Shares give super a boost
Analysts said the majority of Australian super funds’ strong profit performance was courtesy of a second year of rebounding share markets across the world.
Those with higher proportions of funds invested in equities generally performed well this year.
“Equities shone with an average return across the board of 17 per cent for the year, with investments in global equities showing an average return of 20 per cent or more,” Anthony Serhan, Morningstar’s head of research strategy for the Asia-Pacific region, explained.
“And don’t forget, these returns are after tax and after fees.”
SuperRatings’ analysts came up with similar observations, adding that shares accounted for 78 per cent of the total profit result, across the board, even though the funds invested were less than 60 per cent of the total available.
Investments in property (9.3 per cent) also did well overall, bonds less so (4.9 per cent), the firm said.
Don’t plan for an early retirement yet
Morningstar’s Serhhan sounded a note of caution, warning that as as most of the profits from the share market were locked in during the first half of the 2013-14 financial year, that asset class is “fully priced”, so Australian super funds might not see double digit returns again in 2014-15.
Tom Garcia, chief executive of the Australian Institute of Superannuation Trustees, whose membership includes the trustee directors and staff of the super funds themselves, while applauding another year of double digit returns, agreed, adding that it’s the longer term outlook that matters.
Under new disclosure rules, super funds are now providing more information on their MySuper default options, which is where most Australians have their super invested.
Garcia noted that on these numbers, most MySuper options expect to achieve annual returns “in the vicinity of six to eight per cent” and to produce a negative return “every five or so years”.