Eight superannuation funds delivered returns in excess of 20 per cent to June 30 this year as a booming share market helped the $3 trillion sector post its strongest returns in 24 years, according to research house Chant West.
Top performer growth fund was Mine Super, an industry fund for coal miners, that returned 22.6 per cent over last financial year.
Mine Super has 61 to 80 per cent of its funds invested in high-return assets such as equities when the company decided to boost its exposure to the share market in the early stages of the pandemic, said its chief investment officer Seamus Collins.
Seven other funds including Colonial First State, Hostplus, MLC and AustralianSuper also posted returns in excess of 20 per cent.
The median growth fund posted an 18 per cent over the 2020-21 financial year – the sector’s best result in 24 years said Chant West.
“This would have been inconceivable a year ago after the financial disruption caused by COVID-19” said Mano Mohankumar, senior investment research manager of Chant West.
He said that the top funds over the past year had higher allocation to listed shares – despite the battering the share market took in February and March 2020.
“Australian shares gained an impressive 28.5 per cent while international shares surged 37.1 per cent in hedged terms,” Mr Mohankumar said.
The weakest performing asset classes during the financial year were bonds and cash.
“Cash was virtually flat with a return of just 0.1 per cent while Australian and international bonds fell 0.8 per cent and 0.2 per cent respectively,” Mr Mohankumar said.
Over the last 10 years, industry funds AustralianSuper and Hostplus were the top-performing growth funds delivering annual returns of 9.7 per cent to members.
“The typical long term objective for growth funds is to beat inflation by 3.5 per cent which translates to about 5.5 per cent to 6 per cent per annum.
“The results delivered over the past two decades had been well above target.
“Over the longest period we can measure, Australia’s major super funds have delivered on their promises to members, growing their wealth in real terms while protecting them from undue risk,” he added.
Best Super Fund Australia 2021
Growth Funds year to June 30 2021
FUND RETURN
Mine Super Growth 22.6%
CFS First Choice Growth 21.7%
VISSF Balanced 21.6%
Hostplus Balanced 21.3%
MLC Horizon 4 20.8%
Sunsuper Balanced 20.7%
AustralianSuper Balanced 20.5%
REI Super Balanced (My Super) 20%
Telstra Super Balanced 19.9%
BT Active Balanced 19.7%
Source: Chant West
Try YourSuper Tool
The Australian government recently launched a new online tool that will help you compare superannuation funds.
The YourSuper tool lists the different super funds alongside their investment performance, yearly fees, six-year net return, and a tickbox so you can choose the funds that you want to look into.
Check our latest blog on this comparison tool.
Questions to Ask In Choosing a Super Fund
According to the latest estimates from the Association of Super Funds of Australia (ASFA), you need at least $640,000 in your super if you have a partner or $545,000 if you are single to live a comfortable retirement.
The figure assumes you withdraw your super as a lump sum on top of your Age Pension. But the amount of super you need personally will vary based on the lifestyle you want to maintain when you stop working.
Therefore in choosing your super fund, you need to compare available options based on factors that are important to your goals.
The factors to look into are performance, fees, insurance options, and other services that are suitable to your circumstances.
So in evaluating a super fund, you should try asking the following questions:
Does the super fund had good performance in the past?
Remember, super is a financial structure designed to help you save for retirement.
As a long-term investment, performance is an important factor to look into in choosing a fund.
Small variations in performance could make a huge difference to your retirement fund. You may also need to study the performance of superannuation investments when you are considering all your options.
While historical performance is not a reliable indicator to project future fund performance, a good long-term return can boost your retirement fund and even a minimal difference could add up to a lot of money once you stop working.
What are the fees for your super fund?
Fund management or administration fees could vary widely from one fund to another and from different investment options.
While an extra 0.30% p.a. in super fees may seem insignificant when you are just starting your super, the added investment fee could add up as your money grows.
But be sure to consider the charges alongside other factors because lowest fees doesn’t mean that the fund is the best option for you.
What are the investment options?
Take note that super is an important component of your retirement savings.
The underlying investment that you choose to hold within the instrument is crucial for the performance of your fund.
Popular investments in super include asset classes, shares, property, bonds, or cash.
Seek professional financial advice to choose a balanced option and make sure that your fund matches your target investment returns.
What type of insurance options are included in the super?
Most funds offer a type of insurance with premiums considered cost-effective for most working Australians.
But take note that the level of cover may not be enough in the future and there are restrictions in claiming.
The types of insurance that are included in most super funds include life insurance, total and permanent disability insurance, and income protection insurance.
Are there supplemental services offered by the fund?
To attract more investors, many super funds offer supplemental features, which can further help you achieve your financial goals.
Popular services bundled in most super funds include online account access, easy process for additional contributions, complementary financial planning sessions, online calculators, free webinars, and more.
Try shopping around and make a list of services that you are looking for. Remember, your super can help you live a comfortable retirement. So research your options, perform your due diligence, and choose funds that are suitable to your current circumstances and future needs.
Ideally, you should work with a financial adviser who specialises in superannuation so you can have an informed decision.
Regularly Check Your Super Fund
Checking your fund with an advisor or professional will make sure that your investment matches your needs.
Conduct performance tests to make sure that your fund is on par and high performing (bearing in mind that previous performance is not a reliable indicator of future performance).
Be sure that you are not overpaying on fund management and administration fees and your level of insurance is enough or at least reasonable to your fund balance.
Also consider other opportunities that you may take advantage of to further boost your super fund.