Australians worried about their retirement savings during the pandemic-induced market volatility can now rest easy as it is revealed that superannuation has weathered the economic storm.
Last week the Australian Prudential Regulation Authority (APRA) revealed that just 0.3 per cent of the value of Australian superannuation has been lost in the 12 months to 30 April 2020.
Despite this, APRA’s figures show Australia’s super values contracted 7.7 per cent during the three months between December 2019 and end March 2020.
Alex Dunnin, executive director of research and compliance at Rainmaker Information says: “Compared to the 23 per cent fall in global stock markets in the first quarter of 2020 as well as the 14 per cent fall over the 12-month period to March, this is a stunning result.”
Rainmaker’s SelectingSuper index which tracks MySuper performance fell 11 per cent during this three-month period and over 12-months is down only 4 per cent.
Dunnin says Australia’s superannuation savings have only fallen to March 2019 levels whereas during the 2008-09 Global Financial Crisis the SelectingSuper index fell as low as -21 per cent.
The not for profit (NFP) super fund segment comprising corporate, public sector and industry super funds, contracted just 5 per cent in the March quarter.
Self-managed super funds contracted 9 per cent in the same period. The retail super fund sector contracted up to 12 per cent.
“While the retail super segment holds roughly one-quarter of superannuation savings assets compared to the NFP segment that holds half, each segment fell by about the same amount in dollar terms,” Dunnin says.
APRA figures show the retail super fund segment holds around 24 per cent of in Australian equities, compared to just 15 per cent by NFP funds therefore they are more vulnerable to fluctuations in equity markets.
Dunnin says: “However industry funds with a larger share of their investments in unlisted assets such as real property, infrastructure and private equity were better insulated from the worst of these equities falls.”
With the early release super scheme, there were liquidity concerns for funds with larger holdings in unlisted assets such as property, private equity and infrastructure.
Despite this, APRA revealed that super funds held $273 billion in cash at the end of March. This is 27-times the amount of money that has so far been paid out in early release claims.
Dunnin says that the additional $466 billion that super funds hold in bonds should be taken into consideration as a liquid asset.
“NFP funds have 37 per cent of their assets available in cash and bonds, marginally exceeding the 36 per cent held by retail super funds. Industry funds hold 31 per cent of their assets in these instruments.”
During the March quarter, funds received $29 billion in contributions, taking the value of total contributions for the past 12 months to $121 billion. This is the highest inflow in over two years.
“Sure, they may have a higher than average proportion of younger members, however, they receive hundreds of millions in contributions each month,” Dunnin says.