Super funds report some profit despite coronavirus and mass exits

Australia’s hugely rich superannuation industry has reported a remarkable performance through coronavirus – despite record outflows thanks to the government’s early access scheme.

Despite the market turmoil on the back of COVID-19 pandemic,  First State Super – which has recently merged with VicSuper to create a $120 billion mega fund –  returned the best performance of 1.3 per cent last financial year.

It was ahead of Unisuper at 1 per cent, Cbus at 0.75 per cent and AustralianSuper at 0.52 per cent.

Other super funds will deliver their first negative results in more than a decade, with superannuation researcher Chant West predicting average returns of minus 1.3 per cent for this financial year.

“To arrive at the end of the financial year with a positive result given the turmoil we have seen is a very good out come for members,” AustralianSuper investment chief Mark Delaney told The Australian.

“The economy has grown faster than people had expected over the past few months. Governments are spending big, interest rates are low and the financial markets are coming in behind them. Financial markets are now more confident that outbreaks can be managed,” he added.

AustralianSuper has $185 billion under management with 55 per cent invested in equities and 33 per cent in international equities.

But all the major super funds are braced for the next onslaught in September as they nervously watch what will happen to the economy when the government stimulus runs out.

If the economy does not improve, Mr Delaney said the government will have to maintain some form of incentives particularly for the hardest-hit sectors such as tourism, education and entertainment.

He also expressed concern about the government’s early superannuation release scheme to allow Australians to withdraw up to $10,000 from their super funds last financial year which, he said, has been dominated by 30-year-olds.

AustralianSuper has been hardest hit by the scheme, with 346,267 members withdrawing more than $2.4 billion to June 28.

The danger is that $50,000 invested 20 years ago would be worth $200,000 today and it would double in another 20 years.

About 2.4million Australians have withdrawn more than $17 billion from the super savings with a second wave of applications expected after the second round opened on July 1.

In a bid to head off the second wave of withdrawals, the ATO has warned it will be cross-matching claims to stop those who haven’t suffered financial hardship from taking out their money.

With the big dent in retirement savings, the Australian Super Industry calculated that drawing out the full $20,000 allowed would mean an extra 6.5 years working past retirement to make it up.