Australia’s superannuation sector is feeling the pinch as the coronavirus crisis continues to weigh on workers’ savings.

The industry-wide rate of return (ROR) fell to a record minus 10.3 per cent in the March 2020 quarter, according to new data from APRA.

A super fund’s ROR reflects how much money a fund either makes or loses, expressed as a percentage of the total amount of money a member has already invested.

The first-quarter figure was the lowest quarterly ROR recorded since APRA began tracking it 15 years ago, and dragged the annual industry-wide ROR for the 12 months ending March 31 to a disappointing minus 3.3 per cent.

The total value of the assets held by Australia’s super sector also dropped, falling 7.7 per cent over the quarter, to $2.73 trillion.

The fall was enough to push the total value of savings held by the system 0.3 per cent below the level recorded at the end of the March 2019 quarter.

Much of those losses were driven by the self-managed super sector, which experienced a 4.1 per cent decline in total asset values.

That drop helped to mask the 1.1 per cent gain seen in APRA-regulated funds (mainly industry and retail funds).

Although worrying, the numbers suggest the sector is holding up better than during the global financial crisis last decade.

“There hasn’t been the big meltdown that people were expecting,” Rainmaker executive director Alex Dunnin said earlier this month.

“During the GFC, in December 2008, funds fell 21 per cent so we won’t get anywhere near that.”

Super contributions continued to increase at a healthy 6.9 per cent in the 12 months ending March 31, according to APRA, while benefit payments grew by an immense 14.5 per cent during that same period.

APRA eyes further consolidation

In a separate update, the financial regulator cautioned “not all funds are equally well equipped” for the changing shape of Australia’s economy.

“Australia’s retirement income system is among the best in the world,” the regulator noted.

“But a combination of falling asset prices, liquidity pressures and declining member contributions have put many funds’ financial and operational resilience to the test over recent months.

“The short-term impact of the COVID-19 crisis will pass, but some of its effects will be long lasting.”

Many funds are managing the crisis well, and are expected to continue doing so.

But others are struggling, and the regulator said these funds must consider consolidating with better-performing peers for the sake of their members.

“For some, the only way forward to secure the future of their members for the long term may be to exit the industry and pass on the trusteeship of their funds to others who are better equipped for the task,” APRA said.

Earlier this week, the regulator revealed 1.41 million Australians have taken a combined $10.6 billion out of super through the government’s early super access scheme.

On average, Australians using the scheme are taking $7510 from their retirement savings before leaving the workforce.

Younger Australians are withdrawing the most under the scheme.

The New Daily is owned by Industry Super Holdings