A disappointing 2018-19 financial year awaits superannuation funds despite a recovery in the March quarter, according to SuperRatings.
According to its estimates, balanced option returns were largely flat through March as markets were weighed down by weaker economic data and fears of further falls in home prices.
The estimated financial year-to-date return for the median balanced option is 3.2 per cent, which so far ranks as the seventh worst result since the introduction of the super guarantee in 1992.
The typical balanced option (defined as an option holding between 60 to 76 per cent growth assets) returned an estimated 0.8 per cent in March as the share market recovery came to a halt, SuperRatings said.
The typical growth option also grew at 0.8 per cent following strong gains in January and February of 3.2 per cent and 3.4 per cent, respectively.
Further, SuperRatings said the federal budget went largely unnoticed by markets, which had already anticipated many of the tax and infrastructure spending measures.
It said Australians will head to the polls on 18 May, and while super is unlikely to be a defining election issue, there will be plenty of debate around Labor’s proposed changes.
“The federal budget delivered no surprises either for markets or for the super industry,” said SuperRatings executive director Kirby Rappell.
“This is not a bad thing, because often the best thing a government can do is leave super alone.
“The focus during the election will be on Labor’s proposed changes, which include reductions in contribution caps and the removal of imputation credit cash-outs, which will have a significant impact on SMSFs.”
Mr Rappell said falling home prices combined with weaker share market performance is the biggest challenge currently facing retirees.
“Falling house prices have a negative wealth effect that flows through to consumer spending, but they also throw a spanner in the works for many Australians approaching retirement who may have planned on downsizing and adding the windfall to their nest egg,” he said.
Adrian Flores is a deputy editor at Momentum Media, focusing mainly on banking, wealth management and financial services. He has also written for Public Accountant, Accountants Daily and The CEO Magazine.
You can contact him on [email protected].
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