Share market falls eating into superannuation savings as Donald Trump gives investors the jitters
President Donald Trump’s tariff turmoil is hurting Australia’s retirement savings, with growth-seeking super accounts falling more than 1 per cent in late February and facing similar losses already this month.
Research group SuperRatings figures show the US-led plunge in share markets over the past three weeks is hurting growth-seeking super funds — and likely hitting tax-free accounts held by retirees hardest.
SuperRatings said balanced accounts supporting account-based pensions fell 0.9 per cent for the month of February, while balanced accounts held in taxable accumulation mode fell 0.8 per cent.
Retiree accounts with SuperRating’s higher-risk growth investment setting fell an average 1.4 per cent in the month, while growth funds in accumulation mode fell around 1.2 per cent. Losses in accumulation accounts can be partially offset by deductions against their tax liabilities.
After having been steady or risen marginally in the first half of the February, share markets began falling amid worries about economic instability and even trade wars as the result of Mr Trump’s aggressive agenda.
Australia’s S&P-ASX 200 index fell 4.3 per cent in the second half of February, the US’s tech heavy NASDAQ index dropped 4 per cent and Wall Street’s broader S&P-500 index fell 3.1 per cent.
In an ongoing threat threat to growth-oriented super accounts, the S&P-ASX 200 index has fallen another 2.6 per cent so far this month, NASDAQ has lost a further 3.5 per cent and S&P-500 is down 3.1 per cent.
SuperRatings research chief Kirby Rappell said it was important to remember that for most of us, the focus of superannuation was long-term outcomes.
Mr Rappell said we should maintain a long-term strategy and warned against making rushed decisions “when markets are more turbulent”
He pointed to balanced super accounts in accumulation mode having grown 7.2 per cent from June 30 to the end of February and having averaged 6.9 per cent annual growth over the past decade.
Retirees’ funds with a balanced risk setting had grown 7.9 per cent in the eight months to end of February and an average 7.5 per cent a year over a decade.
But it can be difficult to understand the risk settings of many super funds because managers and promoters have great discretion in how they assess and disclose the risks of various assets, including infrastructure, property and increasingly-popular private debt plays.
There is also a variety of ways the pre-set investment mixes offered by funds can be categorised using words such growth, balanced and conservative.
Broadly in line with industry jargon, SuperRatings defines balanced funds as having from 60 per cent to 76 per cent of investor savings in higher-risk, higher-return assets.
SuperRatings’ categorises growth funds as having 77 to 90 per cent of savings in riskier assets such as shares, property, private equity and infrastructure.
The latest SuperRating figures show so-called capital stable funds with just 20 to 40 per cent of retirement savings in riskier assets were spared the February pain, rising a modest 0.1 per cent for the month.
While their long-term performance is well behind growth-set funds, the returns on conservative funds for this financial year could catch up with so-called balanced accounts and even growth accounts if the falls continue.
SuperRatings figures indicated capital stable accounts had returned an average 5.2 per cent from June 30 to February 28 for accumulation accounts, while the return was 5.7 per cent for tax-free retiree accounts.
For those concerned about their funds’ performance, Mr Rappell said it could be worthwhile seeking advice before making a decision.
Advice services were often available through the fund, or they could be obtained from a professional adviser.
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