Australian superannuation fund members made a stunning $400 billion in profits last year, according to new research from SuperRatings.

The group found that the average balanced fund, with between 60 and 76 per cent growth assets in its portfolio, returned 13.4 per cent in 2021.

On those figures, a fund with $50,000 at the beginning of the year would have finished the year with a balance of $56,700.

However, the best performing funds did far better than average, with Hostplus’ balanced option shooting the lights out with a 19.1 return.

The Hostplus performance was no flash in the pan, either.

The fund topped the 10 year performance charts too, returning 10.7 per cent annually over a decade.

To put that into context, over the past 21 years since 2000 the average balanced fund return has been just 6.6 per cent.

Someone staying with Hostplus over 10 years would have seen a $50,000 balance grow to $138,180 without making extra contributions.

The average return for balanced funds over 10 years was a still very strong 9.2 per cent.

SuperRatings CEO Kirby Rappell said the returns were “very strong” and were the sixth-highest of all time. Super is performing remarkably strongly with “only one negative year since the GFC”, Mr Rappell said.

The top 10 performers over one year included three different fund types.

The top fund, Hostplus, is an industry fund, but number two, Qantas, and number five, Telstra, are corporate funds run for workers at the two groups.

Numbers six, seven and eight and 10 were for-profit retail funds with the rest being industry funds.

Interestingly only three funds, Hostplus, AustralianSuper and Sunsuper, appeared in the top 10 over both one and 10 years.

Superannuation was performing much better than expected when the system was designed, Mr Rappell said.

“Originally the system aimed at returning the inflation rate plus 3 per cent but in the last three years inflation has been virtually zero,” he said.

Low inflation helped

Over three years the average balanced fund has returned a healthy 10.5 per cent, while average inflation rate over that time was just 1.65 per cent.

That has pushed super fund members well above expectations in terms of returns over that time.

Although balanced super funds have been returning remarkable amounts the same is not to be said of cash and bonds, where low interest rates have eaten into returns.

Those allocations have been traditionally been favoured by retirees who want steady returns with little risk.

As a result retirees are moving up the risk scale to boost returns.

“More funds are using a conservative balanced option with between 40 and 55 per cent risk assets,” Mr Rappell said.

Those moves were being made because of an awareness that “people are going to be retired for a lot longer” as life expectancy grows.

However, it is wise to consider whether to move all your funds to a new allocation when you retire.

“You could be lucky and retire when markets have been very strong or you can be unlucky and retire when markets are going through a really tough time,” Mr Rappell said.

Retiring when markets have fallen strongly means you have to convert more super units to get a given level of cash income than you would have had to when markets were high.

Consequently it is a good idea not to transfer all your super balance to a more conservative option on retirement without reviewing your options. It can be good to consult an adviser at this stage.

The New Daily is owned by Industry Super Holdings