Superannuation pain

Which superannuation funds are performing the best through the difficult international financial position we are in? Which funds are diminishing and taking the savings of members with them?

We are already into the final quarter of the financial year and June 30 is just around the corner. But with this comes the prospect of all the major super funds delivering a negative return for their members and this is a stark reality for many.

Whilst it seems that not-for-profit industry funds have performed well in comparison to retail master trusts, almost all funds have not turned a positive result. Already, the most poorly ranked super funds in the latest Superratings survey have lost more than 11 per cent, only after nine months of the financial year.

According to Superratings Researcher Jason Clarke "those funds are heavily exposed to the share markets both Australian and international.'' Which can also mean if global fortunes change "they can bounce back quickly'', Mr Clarke said. But as we move towards the end of the financial year, the downturn in investment markets is continuing.

According to Mr Clarke many funds have never delivered a negative return before now, "for the first time since financial year 2002, there will be widespread double digit negative returns,'' he said."The big differences between now and 2002 is that the news will be worse for many more people this time around.''

Another key issue for members will be how funds report annual performance in the reporting season. Many annual reports will be subjected to an increase in regulator and investor scrutiny this year.

The Minister for Superannuation and Corporate Law, Senator Nick Sherry, has told fund managers that he and the regulators are watching super funds in the lead up to the end of the financial year.

"I think the issues for superannuation funds will fall into two broad areas,'' Sherry said."Trustee's governance, particularly the liquidity issue when we have negative rates of return, as they're likely to be and, secondly, in terms of disclosure how negative rates of return are reported to fund members.

"Even though there's three months to go until the end of the financial year, I'm advised by most funds that it's highly likely we'll see more widespread negative rates of return than we've seen before,'' he said. "And how that is reported and how that's oversighted by APRA, the industry regulator, will be important given probably the most widespread negative rates of return since 1987 when superannuation became compulsory.''

Industry Super Network executive manager, David Whiteley, believes larger amalgamated super funds were now too big to smooth out their results.
"Reserves haven't increased at the same rate as funds under management,'' Mr Whiteley said. "I don't think funds can make much of a tangible difference by smoothing and it's not as if returns are going to be 0.1 or 0.2 per cent down. A few might try it but I doubt it.''

How the big funds have performed:

Fund (Balanced) Past 3mths % Year to date %
AGEST - 5.55 - 3.43
AMP - 9.10 - 7.66
AustralianSuper - 7.80 - 5.10
BT Lifetime Super - 8.93 - 11.07
Cbus Core - 6.49 - 4.33
CARE - 6.36 - 3.57
Colonial - 6.78 - 6.68
FirstState - 7.40 - 5.80
Equipsuper - 6.41 - 4.72
HOSTPLUS -5.97 -2.16
ING Corp -8.97 NA
JUST -6.18 -4.30
LeggMason corp -11.86 NA
LUCRF -7.32 -4.60
MLC Horizon 4 -6.95 -6.00
MTAA -5.24 -1.70
REST - 4.58 -2.88
TWUSuper -5.76 -5.11
UniSuper -6.65 -4.91
Published on April 4-th, 2008 in Financial Planning
Damon Rasheed is the CEO of Rate Detective, an Australian financial service comparison sites specialising in Life Insurance, Income Protection Insurance and home loans. Damon holds a Master's Degree in Economics from the University of Melbourne and has been involved in many start-up internet businesses.