A big four bank’s superannuation business saw switches by fund members rise to three times the usual rate in March, as the coronavirus pandemic rocked the markets.
The data from Colonial First State (CFS) has revealed 39 per cent of its members who switched their super moved to cash, while roughly the same number of members switched to growth assets (including Australian shares).
The second most popular investment category was Australian shares (26 per cent).
CFS switch call volumes were reported to peak on 23 March, following the S&P/ASX dropping 36.5 per cent from its prior high, to 4,546 points.
The provider experienced its highest number of switches to cash that day (65 per cent) and the lowest percentage of switches by dollars to growth assets (9 per cent).
The average amount switching to cash was $99,000, compared to the growth average of $19,000 – CFS noted that moving to growth was therefore more a partial reallocation of member’s portfolios.
CFS general manager of investments Scott Tully commented the switching activity had been directly linked to how the Australian market is performing.
“We saw some people switching to cash, which means those members missed out on upside as markets rebounded,” Mr Tully said.
“Fear of volatile markets can drive decisions that might not be in a member’s long term interests. During this challenging time it’s important to remember that super is the longest-term investment many of us may ever have.”
On the other hand, just as super members were “spooked by the volatility”, many were looking to invest as the market fell.
“There are members who understand that super is a long term investment but are prepared to take advantage of lower prices in the middles of a crisis,” Mr Tully said.
Pre-retirees (members aged 50 to 64) were the most likely to switch to cash, making up 47 per cent of all switches to cash, followed by members aged 40 to 49, with 19 per cent of switches.
Retirees (members aged 65 and older) were the least likely to switch to growth assets, making up 9 per cent of all transitions to growth.
Meanwhile, younger members aged 49 and under, were the most likely to switch to growth assets over cash, with the age group making up 45 per cent of all switches to growth assets. A third (34 per cent) of movements to cash were by younger members.
Mr Tully said CFS is committed to equipping its members and advisers with tools to get through the challenging period, including more regular communications, digital interaction with products, a dedicated website for government support elements, and webinars.
“It’s crucial for members not to lose sight of their long term goals and personal investment objectives and seek quality financial advice about managing market volatility before making a change,” he said.
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