Understand How Your Super Is Performing

In the last couple of years, turbulent financial conditions have had an impact on superannuation balances for most Australians. In times of volatility, what should you be aware of? We answer some commonly asked questions.

How is REST performing?
How do investment markets impact my super account?
Is it normal for markets to fluctuate?
In times of a market downturn, what should I do?
In terms of market cycles, is there a good time to contribute to super?
Should I consider getting advice?
 

How is REST performing? 

We’ve worked hard at looking after members’ money and, in recognition of this, have received a number of major awards. REST has been named ‘Best Superannuation Fund Manager 2010’ by Money magazine; ‘Fund of the Year 2010’ by SuperRatings; ‘Fund of the Year 2009’ by SelectingSuper; and ‘Industry Fund of the Year’ as part of the AFR Smart Investor Blue Ribbon Awards 2009. 

All these awards reflect the positive results that REST’s low fees, innovative insurance and great customer service have for members.

They also recognise REST’s strong, long-term returns. Indeed, our Core Strategy option, which most REST members belong to, has been a top-tier performing investment option for the one, three, five, seven and ten year periods to 30 September 2009.^

View REST's performance results at 30 September 2009.
 

How do investment markets impact my super account?

Many members are in our default Core Strategy option, which is made up of a mix of investments including shares, property, bonds, cash and alternatives.

Shares form a significant part (over 50%) of Core Strategy’s investments. When the share market’s going well, this assists Core Strategy’s performance, and helps your super to grow.

Conversely, a falling share market will cause a decline in the performance of Core Strategy, which will in turn impact your super balance.

If you’re in another REST investment option, your balance will perform in line with underlying investments the option holds.

Is it normal for markets to fluctuate?

Over the short term it’s normal for the share market to fluctuate. This is a natural part of the investment cycle.

However, history shows that over the long term, the share market tends to rise in value, helping your super to grow.
 

In times of a market downturn, what should I do?
 

In times when the market goes down, it’s sensible to stay calm and take a steady, patient approach. You should, in particular, think carefully before switching out of a share-based option (such as Core Strategy) into a more defensive option (such as Cash). By ‘panic’ switching, you may lock in your losses then miss out on an upswing in the event of a market recovery.

In terms of market cycles, is there a good time to contribute to super?
 

Judging by investor behaviour, people are more inclined to put money in super when markets are positive.

On the other hand, there are those who see a downturn in the share market as a good investing opportunity. By putting money into super when assets are cheaper, you stand to benefit in the event of a market rebound.

Irrespective of the stage in the market cycle at which you’re comfortable investing, putting extra money into super can make good sense.

This is because super’s a great way to accumulate money for your retirement compared to other forms of investing, and this is largely due to the concessional tax treatment which super receives:

• Within super, investment earnings are taxed at a maximum rate of 15%, which is paid by the super fund and not the individual. Compare this with tax on investment earnings outside of super, which can be as high as 46.5% (including Medicare levy), payable by the individual.
• Once you’re aged 60 and over, generally, all super benefits you receive are tax free.

Learn more on making personal contributions.

Consider getting advice
 

Consider discussing your super with a financial adviser, who can provide information and guidance based on your personal circumstances.

If you don’t have an adviser, we can connect you with a Money Solutions¹ coach, and if you’re a REST member we’ll pay for your first over-the-phone question on a super-related topic. Simply phone us on 1300 300 778.

¹ Money Solutions Pty Limited AFSL 258145. Money Solutions personnel are not representatives of the REST Trustee. Any financial product advice given by Money Solutions is provided under the Money Solutions AFSL. The Trustee does not accept liability for any loss or damage incurred by any person as a result of using products or services provided by Money Solutions.

Table notes

The Core Strategy returns shown are crediting rates — the rates allocated to members’ accounts. Crediting rates have differed from actual earnings rates in some years, and for more information click here. N/A applies to options running less than the indicated time periods. All returns are post investment management fees and tax. The returns for the three month period are not annualised. Returns for the three, five and seven year periods are annualised compound averages. Past performance is not necessarily an indicator of future performance.

 ^ Core Strategy was ranked 1st quartile for these periods based on the SuperRatings September 2009 Fund Crediting Rate Survey, SR50 Growth Index