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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've seen the benchmark ASX200 Index fall more than 30% from recent highs. 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 said he estimates super funds to be down this quarter, but probably not by as much as you'd think.

"Since the end of January, we estimate that the median growth fund (61 to 80% growth assets) is down about 5-5.5% (as of early 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, the best-performing growth super fund returned an impressive 18.4% in 2019, with the top 10 funds all returning 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 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."

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.

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.

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 Past performance - 5 Years Calculated fees p.a. on $50,000 balance
QSuper Lifetime - Aspire 1
14.54%
9.53%
8.96%
$395
The Lifetime option is a MySuper product that adjusts your investment mix each 7-10 years as you get older.
QSuper is a member-owned super fund and is one of the largest super funds in Australia.
Sunsuper Lifecycle Balanced
15.35%
9.6%
8.99%
$523
The Lifecycle Balanced option is a MySuper product that invests your super in a balanced fund until you’re near retirement.
Earn a Retirement Bonus of up to $4,800 when you open a new Income account. T&Cs apply.
Virgin Money Super - Lifestage Tracker
21.02%
9.9%
N/A
$358
The Lifestage Tracker is a MySuper product that invests in a range of asset classes in line with your age.
Performance figures and fees are based on the LifestageTracker: Born 1969-1973. Earn Velocity Frequent Flyer Points for making contributions to your super (T&Cs apply).
HESTA - Core Pool
14.03%
9.02%
8.4%
$533.53
The Core Pool invests in a mix of asset classes and is an authorised MySuper product.
HESTA is an industry super fund open to all Australians and designed for employees in the health and community services sector.
Future Super Renewables Plus Growth
9.24%
N/A
N/A
$958.60
Future Super is Australia’s first 100% fossil fuel free super fund and is certified by the Responsible Investments Association Australia.
The Future Super Renewables Plus Growth option has a 20% asset allocation in renewable energy projects while excluding investments in live animal export, tobacco and gambling.
Australian Catholic Super Lifetime - Grow
14.25%
N/A
N/A
$588
The LifetimeOne investment option is a MySuper product that changes your investment mix as you get older.
A Catholic super fund open to all Australians and designed for people working in Catholic education, healthcare or aged care.
Superestate Balanced Essentials
New Fund
New Fund
New Fund
$291.50
The Balanced Essentials fund invests in a range of shares, residential property and other assets and has a medium level of risk.
Superestate focuses on investing your super in physical residential properties and charges some of the lowest annual fees in the market.
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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 December 2019.

What should I do with my super in a recession?

While we're not yet at this stage, there has been talk of potential recession in the near future. 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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