Australian super system’s long-term focus designed to ride out market volatility

Australia’s super system is designed to grow Australians’ retirement savings long-term, even as local and global share markets experience increased volatility due to the conflict in the Middle East.

Periods of geopolitical instability understandably cause concern for Australians watching devastating images on the news and sharp market movements.

Australia’s super system is built to withstand short-term shocks and deliver strong returns for members over decades, not days or weeks, under the stewardship of highly skilled investment experts.

Super has historically performed strongly over the long term – with profit-to-member funds returning over 7.5% a year on average over the last decade to December – despite the ups and downs in the equity markets.

Super is typically a highly diversified investment. Most Australians’ super is invested in balanced options, with investments diversified across a diversity of assets and geographies - moderating the impact on members’ super returns from changes in any one stock market.

For the millions of Australians with retirement savings in super, particularly in profit-to-member super, the system is designed to navigate short-term shocks to the Australian and other economies through investments in infrastructure, property, private equity, cash and bonds other assets typically not listed on global share markets.

The Council’s analysis of significant market downturns shows balanced options experience a fraction of the impact seen in equity markets and make speedy recoveries.

One key risk can be when people switch their super savings to cash or other defensive assets after markets have fallen. That can potentially crystallise losses and mean people miss out on market rebounds.

“Australia’s super system is built for the long term, and history shows it is well placed to weather periods of volatility and uncertainty,” said Super Member’s Council’s Executive Manager Strategy and Insights Matt Linden.

“For most working super fund members, this week’s market movements will have little impact over the medium to longer term.

“For current retirees or pre-retirees heading towards retirement soon, money that remains in super for many years enables short-term losses to balances to bounce back.”

“If you’re thinking about moving your money during a short-term market downturn, you could miss out on a recovery in value when markets cycle upwards again.”