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Coronavirus: What should you do with your super?

With the impact coronavirus is having on the stock market, is now the right time to make changes to your super investments or switch super funds?

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Coronavirus (among several other factors) has caused stock markets to fall all over the world. In Australia we saw the benchmark ASX200 Index fall more than 30%in March 2020. Although the stock market has been recovering strongly since March, it's still significantly below the level it was at in February and remains very volatile. With all this noise and hype about the stock market, it's hard not to be getting a bit concerned about superannuation. After all, your super is basically one big investment portfolio comprised of local and international shares, along with many other assets.

But is this concern warranted, and should you be making changes to your super investments to decrease your exposure to risky assets? And is now a good time to switch super funds? To help answer these questions, Finder spoke with superannuation investment experts from QSuper, Sunsuper and Chant West.

Well-diversified portfolios shouldn't be too greatly impacted

Senior investment research manager at Chant West Mano Mohankumar told Finder he estimates super funds to be down in the March quarter, but probably not by as much as you'd think.

"Since the start of the financial year, we estimate that the median growth fund (61 to 80% growth assets) is down about 6% (as 31 March 2020). This loss for growth funds is minor in the whole scheme of things particularly given the tremendous returns super fund members have received over the past decade," said Mohankumar.

According to Chant West, in 2019 the top 10 growth funds all returned above 16% for members.

QSuper chief investment officer Charles Woodhouse acknowledged the stock market losses but reminds us that other asset classes are performing well. So if your super is invested in a diversified mix of assets (this is the case for most Australians), the impact from the last few weeks won't be too significant at this stage. Woodhouse also confirmed that QSuper has no plans to limit its exposure to stocks in the near future.

"There has been considerable volatility in listed share markets over the past month (March 2020) which resulted in the worst week for shares since the Global Financial Crisis. While this has been unsettling for investors there have been some markets, long-term sovereign bonds for example, that have generated very strong returns during this period," said Woodhouse.

"History has shown that reacting quickly to market volatility instead of taking a longer-term view with a well-balanced portfolio can be costly. QSuper's investment team manage their portfolios with the potential for this sort of negative event in mind, so the structure of the Lifetime Option is not expected to change due to the coronavirus."

Sunsuper chief economist Brian Parker agreed that Sunsuper's multi-asset portfolios won't be limiting their exposure to shares due to the short-term impacts of coronavirus.

"At Sunsuper, we don't invest money on the basis of our own, or anyone else's short-term economic or market forecasts. We carefully construct portfolios with a view to meeting medium to long-term investment objectives. However, falling markets also provide opportunities to acquire assets at cheaper prices, and we have modestly increased our exposure to Australian and international shares," said Parker.

If you're close to retirement, you could reconsider your investment mix.

Parker said older Australians still need to have some exposure to shares, but not as much as younger members.

"For older members, it's important to remember that we all hope to live a long time, and in order for our wealth to last as long as possible, we need to maintain some exposure to growth assets such as shares. However, it's generally not a good idea to have excessive exposure to shares – a sharp downturn just prior or just after retirement can do significant damage to retirement plans," he said.

"For those members who feel they may be over exposed to shares and are very worried about the impact of this downturn on their retirement, they may need to consider moving to a more conservative strategy. However, there are two key things to remember. Moving to a more conservative strategy now, after markets have declined, locks in a loss of capital. And a more conservative strategy by its nature delivers lower long-term returns, and is not likely to capture the full benefit when share markets eventually (and inevitably) recover," said Parker.

If you're young, you shouldn't rush into changing your investment mix.

Even young Australians might be considering switching their super investments to a lower risk options, particularly those who are in growth or high growth super options. But before you make any decisions, it's important to remember superannuation is a long-term game. If you're in your 20s, 30s or 40s your super will stay invested for another 30, 40 or 50 years, so it's important not to get too caught up in short-term market movements.

"For younger members – those with 15, 25 years or more until retirement, this downturn is one of many they will experience during their working lives. For the majority of Australians, our biggest tip would be to do nothing about their super at the moment. Market downturns, whatever their trigger, are inevitable and temporary. Every crisis, every downturn, every recession comes to an end bar none. And it is highly likely that this downturn will be no different," said Parker.

Mohankumar at Chant West agrees, saying: "Members need to remember that superannuation is a long-term investment. There will be good times and some bad times. To most people, we would say remain patient and don't panic. We would caution members that attempting to time the market is a risky proposition."

Since March when the share market had fallen more than 35%, it has since recovered and is up 30% as of the start of June 2020. If you had switched your super from shares to cash in March after the share market fell steeply you would have missed out on this rebound. Yes, the market may fall again, but it will also rebound again eventually.

Is it the right time to switch super funds?

If you're not retiring soon (within the next five years), the general consensus among industry experts is to leave your super invested in the share market rather than switching to a lower-risk cash option. However, that's not to say that you should stick with a high-fee, poor-performing super fund.

If you've currently got your super in a balanced or lifestage fund (which the majority of Australians do), it's always beneficial to compare your funds fees and performance with other balanced super fund options (see our best super funds guide for some of our top picks).

One reason why economists warn against moving your super into cash investments when share markets fall is because you'll miss out when the share market recovers (which it always does eventually). But if you switch from one balanced super fund to another balanced super fund with lower fees, your investment asset allocations will stay largely unchanged. This means you'll still be invested in shares and will enjoy the gains when the share market recovers, plus you'll be paying less fees.

If you can reduce the amount you pay in fees early on in your life, you can retire with much, much more later. Previous research by investment platform Stockspot found that young Australians could retire more than $300,000 richer by switching from a high-fee super fund to a low-fee super fund early on in life.

Use the table below to compare some low-fee, high-performing balanced super funds against your own.

Promoted
AustralianSuper is an award-winning industry super fund and the largest super fund in Australia. The Balanced fund invests in a mix of different assets like shares, property and cash.

Compare balanced super funds below

Use our comparison table to compare super funds based on performance, fees and insurance options.

Name Product Past Performance - 1 Year Past Performance - 3 Years Performance - 5 Years Calculated fees p.a. on $50,000 balance
AustralianSuper - Pre-mixed, Balanced option
0.56%
6.67%
7.37%
$411.18
AustralianSuper is an award-winning industry super fund and the largest super fund in Australia. The Balanced fund invests in a mix of different assets like shares, property and cash.
Virgin Money Super - Lifestage Tracker
-0.86%
6.46%
$358
Virgin Money Super's Lifestage Tracker invests in a range of different assets in line with your age, reducing your risk as you get older, and has some of the lowest fees in the market.
Sunsuper Lifecycle Balanced
-1.69%
5.7%
6.45%
$453
Sunsuper is an award-winning super fund with more than 1.4 million members. Its Lifecycle Balanced option invests your super in a mix of growth assets, and reduces your risk when you're near retirement.
QSuper Lifetime - Aspire 1
-0.35%
5.97%
6.91%
$315
QSuper is one of the largest member-owned funds in Australia. The QSuper Lifetime fund adjusts your investments each 7-10 years as you get older, so you're not taking on too much risk.
HESTA Balanced Growth
N/A
5.84%
6.27%
$538.53
HESTA is an industry super fund for the health and community services sector and open to all Australians. The Balanced Growth fund invests in a mix of asset classes without taking on too much, or too little, risk.
Spaceship GrowthX
11.93%
14.45%
$573
This is a high-risk investment option that aims to deliver high returns over the long term.
Spaceship's Growth X fund invests heavily in Australian and international shares, with a focus on technology stocks. Performance figures and fees supplied by Spaceship, not Chant West.
Australian Catholic Super Lifetime - Grow
-0.39%
N/A
$588
A Catholic super fund open to all Australians and designed for people working in Catholic education, healthcare or aged care.The Lifetime One fund option changes your investment mix as you get older.
Australian Ethical Super Balanced
2.77%
6.88%
6.88%
$622
Certified by the Responsible Investment Association Australasia.
Australian Ethical seeks to invest in companies that have a positive impact on the planet, people and animals, such as renewable energy and healthcare while avoiding investments in coal, oil, tobacco and gambling.
Aware MySuper Life Cycle Growth
1.33%
6.34%
6.56%
$549.42
Aware Super is a not-for-profit fund with more than 750,000 members. The MySuper product invests your super in a pre-mixed Growth fund until you’re 60, then it’ll switch to Balanced.
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Compare up to 4 providers

The information in the table is based on data provided by Chant West Pty Ltd (AFSL 255320) which is itself supplied by third parties. While such information is believed to be accurate, Chant West does not accept responsibility for any inaccuracy in such information. Chant West’s Financial Services Guide is available at https://www.chantwest.com.au/financial-services-guide . Finder offers no guarantees or warranties about the data and we recommend that users make their own enquiries before relying on this information. Performance, fees and insurance data is based on each fund's default MySuper product. Where the performance, fees and insurance data for the MySuper fund vary according to the member's age, results for individuals between 40-49 years of age have been shown. Past performance is not a reliable indicator of future performance.

*Past performance data is for the period ending June 2020.

What should I do with my super in a recession?

The latest GDP figures released by the ABS in June confirm Australia is in a technical recession. One of the best things you can do with your super to prepare is make sure you've only got the one fund (and consolidate if not), make sure you're not paying too much in fees and, again, try to stick with your long-term strategy and not make panicked decisions.

For more information, take a look at our dedicated guide on how to prepare your finances for a recession for tips on building up your savings, paying down your debt, managing your investments and what to do about your mortgage.

Find other ways to save

It can be pretty stressful dealing with your finances, especially in these uncertain times. However, spending a little bit of time on your bills can help you save money and further stress in the long run.

Here are some guides on how to save some money on your daily expenses. There are plenty of things you could do, from checking your energy rates, switching to a low-interest credit card, or simply dropping parts of your insurance that you don't need.

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4 Responses

  1. Default Gravatar
    JohnJune 3, 2020

    Hi, I’m a 61 year old working full time I have enough super to pay my house off (hope) can I access my super to do this or do I have to be unemployed to do this? Regards John.

    • Avatarfinder Customer Care
      TeyJune 4, 2020Staff

      Hi John,

      Thank you for contacting Finder. Hope all is well with you.

      In general, you can withdraw your super when you turn 65 (even if you haven’t retired), when you reach preservation age and retire, or under the transition to retirement rules, while continuing to work. There are very limited circumstances where you can access your super early. These circumstances are mainly related to specific medical conditions, severe financial hardship, COVID-19, or the First home super saver scheme.

      To apply for early super due to COVID-19, you must satisfy one or more of the following requirements:

      >You’re unemployed
      >You’re eligible to get a job seeker benefit, youth allowance for jobseekers, parenting payment or farm household allowance
      >You’ve been made redundant or had your working hours reduced by 20% or more since 1 January 2020
      >You’re a sole trader and you’ve had to pause your business operations, or your turnover has fallen by 20% or more, since 1 January 2020

      If you are eligible for this new ground of early release, you can apply directly to the ATO through the myGovwebsite. You will need to certify that you meet the eligibility criteria relevant to your circumstances. Please note that accessing your super early will affect your super balance and may affect your future retirement income. Consider whether you need to seek financial advice before starting your application.

      Hope this helps. If any other questions arise, please feel free to contact us at any time.

      Best regards,
      Tey 

  2. Default Gravatar
    ParkerApril 20, 2020

    I currently place extra money each fortnight to add to my super. Is this wise or can I just bank it? I have been waiting for my super fund to reply but have no response yet.

    • Avatarfinder Customer Care
      EmilyApril 23, 2020Staff

      Hi Parker,

      Thanks for reaching out to Finder and I hope you’re doing well.

      Whilst putting more money into your Super can be a difficult decision during these trying times, you may do so. This may be a wise thing to do as it could be a better way to guarantee safer returns if you prefer to save for a more comfortable retirement. Please note that you also need to consider different factors in putting extra contributions to your Super such as economic conditions, diversification, risk tolerance, among others.

      Also, please read through the details of the needed requirements as well as the relevant Product Disclosure Statements/Terms and Conditions when comparing your options before making a decision on whether it is right for you.

      I hope this helps. Please feel free to message us if you have any other questions. Have a wonderful day!

      Cheers,
      Ems

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