Covid and market volatility: What should you do with your super?

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

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If you're wondering what to do about your superannuation at the moment, you're not alone.

The Coronavirus pandemic (among several other factors) caused stock markets to fall all over the world in 2020. In Australia we saw the benchmark ASX200 Index fall more than 30% in March 2020. Although the stock market has recovered strongly in 2021, it remains volatile with ongoing lockdowns and changing restrictions around the world.

So should you be making changes to your super investments to decrease your exposure to risky assets during periods of uncertainty? And is now a good time to switch super funds or move your super to cash? To help answer these questions, Finder spoke with superannuation investment experts from QSuper, Sunsuper and Chant West.

Diversified super portfolios shouldn't be too greatly impacted by market volatility

Senior investment research manager at Chant West Mano Mohankumar told Finder super funds have performed better than we all thought they would. Despite all the share market falls in 2020, growth super funds (those with 61 to 80% allocation to growth assets) still managed to finish the year with a positive return. They did experience falls of about 6% during the worst of the year, but they were able to recover.

"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. In 2020-21 they did even better, with the median growth fund returning about 18% and some of the top funds returning over 24%.

QSuper chief investment officer Charles Woodhouse acknowledged the stock market losses in 2020 and ongoing volatility, 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 share market alone 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.

Should you move your super to cash?

This depends on your age and how you feel about risk.

If you're close to retirement

You could reconsider your investment mix and move your super (or at least part of it) away from shares and into more defensive assets. 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 a market 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 after markets have already 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

The general advice is to stay invested in growth assets while you're young and have plenty of time to ride out any market falls. 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, a market downturn (like the covid market crash) 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 2020 when the share market crashed, it has since rebounded by more than 50% (as of October 2021). If you had switched your super from a high growth option to cash in March 2020 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.

Should you change your super to high growth?

If you're still in your 20s, 30s or 40s and have an investment time frame of at least 10 years, a lot of super funds will recommend members stay invested in high growth or growth funds. If you're very uncomfortable with risk, and don't like the idea of your balance potentially going down on occasion, you could stick with a more balanced option instead which aims for less volatility.

It might suit you to switch to a high growth option if:

  • You're young (in your 20s, 30s or 40s)
  • You plan to stay invested for at least 10 years
  • You're comfortable with some level of market volatility
  • You understand super is a long term investment

You can learn more about high growth super funds and compare your options in our dedicated guide.

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 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 super funds against your own.

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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 super funds below

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

Name Product Last 1 year performance (p.a.) Last 3 year performance (p.a.) Last 5 year performance (p.a.) Last 10 year performance (p.a.) Fees on $50k balance (p.a.)

Spaceship GrowthX

Spaceship GrowthX
+23.41%
+15.25%
New Fund
New Fund
$536
This is a high-risk investment option that aims to deliver high returns over the long term.
Spaceship's GrowthX fund invests heavily in technology ETFs with high exposures to Australian and international shares. Performance figures and fees supplied by Spaceship, not Chant West.

Sunsuper Lifecycle Balanced

Finder Award
Sunsuper Lifecycle Balanced
+20.62%
+8.77%
+9.84%
+9.06%
$558
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.

Australian Ethical Super Balanced

Green Company
Australian Ethical Super Balanced
+17.96%
+10.33%
+9.67%
+9.01%
$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.

AustralianSuper - Pre-mixed, Balanced option

Finder Award
AustralianSuper - Pre-mixed, Balanced option
+20.46%
+9.6%
+10.46%
+9.74%
$476
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.

QSuper Lifetime - Aspire 1

QSuper Lifetime - Aspire 1
+17.11%
+9.02%
+8.61%
New Fund
$360
QSuper is one of the largest profit-for-members funds in Australia. QSuper Lifetime continually adjusts your investment mix in line with your age and your super account balance.

UniSuper Balanced

UniSuper Balanced
+17.6%
+9.23%
+9.55%
+9.55%
$326
UniSuper is an industry super fund and one of Australia's largest super funds with more than 450,000 members. Its Balanced option invests in a mix of different asset classes and has achieved consistently high returns for members.

Virgin Money Super - Lifestage Tracker

Virgin Money Super - Lifestage Tracker
+22.17%
+10.04%
New Fund
New Fund
$363
Virgin Money Super Lifestage Tracker has some of the lowest fees in the market. It invests in a range of different assets in line with your age, reducing your risk as you get older. Plus, you can earn Velocity Frequent Flyer Points when you rollover your super, and on the contributions you make (T&Cs apply).

Aware Super Growth

Aware Super Growth
+18.02%
+8.81%
+9.8%
+8.97%
$519
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.

Australian Catholic Super Lifetime - Grow

Australian Catholic Super Lifetime - Grow
+17.36%
+7.42%
New Fund
New Fund
$528
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.

Verve Super Balanced

Verve Super Balanced
+12.85%
New Fund
New Fund
New Fund
$691
Verve Super is an ethical super fund tailored for women. It seeks to invest in companies making a positive impact, such as renewable energy and women in leadership, while avoiding those that cause harm, such as fossil fuels, tobacco and guns.

Superhero Super Autopilot

Superhero Super Autopilot
+14.52%
+8.39%
New Fund
New Fund
$429
Superhero Super Autopilot allows you to invest up to 30% of your super in different themed ASX shares and ETFs, with at least 70% of your balance invested in the Vanguard Global Diversified Index Portfolio. Performance and fees are based on having 100% of your balance in the index portfolio.

AustralianSuper - Socially Aware

AustralianSuper - Socially Aware
+19.4%
+7.89%
+9.25%
+9.2%
$501
The AustralianSuper Socially Aware option doesn't invest in Australian or international companies that directly own coal and fossil fuel reserves, produce tobacco or those which have single-gender boards. Investment performance as of 30 June 2020.

Aware Super - Diversified Socially Responsible Investment

Aware Super - Diversified Socially Responsible Investment
+15.23%
+8.1%
+8.28%
+8.12%
$406
The Aware Super Diversified Socially Responsible Investment is a pre-mixed investment option that excludes companies operating in the tobacco, ammunition, gambling, alcohol, forest logging and pornography industries, as well as companies that attribute 20% or more of their revenue to coal, oil and gas.

Sunsuper - Socially Conscious Balanced

Sunsuper - Socially Conscious Balanced
+19.6%
+8.76%
+8.83%
+8.25%
$463
Certified by the Responsible Investment Association Australasia.
The Sunsuper Socially Conscious Balanced option avoids investment in companies that have significant exposure (more than 5% of revenue) to alcohol, tobacco, gambling, pornography, coal and nuclear power manufacturing. Investment performance as of 30 June 2020.

Australian Catholic Super Bonds

Australian Catholic Super Bonds
+0.65%
+5.04%
+3.92%
+4.1%
$488

Australian Catholic Super Conservative

Australian Catholic Super Conservative
+9.31%
+5.64%
+5.57%
+5.75%
$538
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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 2021.

What should I do with my super in a recession?

One of the best things you can do with your super to prepare for a recession 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; try to stick with your long-term strategy and not make panicked decisions.

For more information, take a look at our 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

    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 myGov website. 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 

    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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