Doug Goodwille from Kayne Anderson speaks to Drew Meredith from The Inside Network on market thinkers.
While a surging gold price is on hold as the world adjusts to a Trump presidency, all the factors that saw its price rise more than 50 per during his first term in office – trade disputes, fiscal deficits and geopolitical tensions – are almost certainly guaranteed the second time around.
Super funds cushion the blow
Superannuation funds have held up well despite ongoing market volatility. Members are encouraged to hold on to their current option and avoid making “knee-jerk” reactions.
Members have reaped the benefits of diversification with different portfolio options performing in line with their allocation.
Research house SuperRatings estimates that the median balanced option fell 8.9 per cent in March and is down 10.0 per cent over the quarter. This is significantly less than the broader equities market drop of over 30 per cent.
The median growth option, which generally has a higher exposure to shares, fell 12.5 per cent in March, down around 14 per cent over the quarter.
The median capital stable option fell only 4.1 per cent in March and 3.8 per cent over the quarter.
Pension returns have also been buffeted by the wave of selling. The median balanced pension option fell an estimated 10.2 per cent over the March quarter. The median growth option fell 14.4 per cent and the median capital stable option was down just 3.8 per cent.
Among last years’ top performers were Tasplan Balanced, with a return of 17.6 per cent and Australian Ethical Super Balanced at 17.2 per cent.
For the March, Australian Ethical Super Balance recorded a loss of 7.60 per cent and Tasplan Balanced was down 8.79 per cent.
SuperRatings executive director Kirby Rappel says trustees switching to cash or a more conservative option will lock in the losses in their fund and will miss out on the upside when the market eventually recovers.
He says: “Knee-jerk changes to your portfolio could have a negative effect on your retirement.”
Fund members should take this into consideration as more than 600,000 are contemplating withdrawing $10,000 from their funds. The tax office began accepting applications via myGov yesterday.
APRA has announced it expects super funds to make early release payments to members who meet the eligibility criteria after approval and direction from the ATO. This should take five business days to reach the member.
Council On The Ageing chief executive Ian Yates warns members could lose tens of thousands of dollars by retirement age if they are withdrawing just $10,000 of super now.
“One of the tragedies of the GFC was that people crystallised their losses by taking their diminished funds out of their super accounts. They then had no way of growing them back and at the same time they lost the multiple tax advantages you get from having your savings in a superannuation account.”
For Australians that are considering dipping into their retirement savings, Rappel suggests members talk to their fund or financial adviser to help ensure any decision is aligned with a long-term strategy.
Last week, the Australian Securities and Investments Commission (ASIC) capped advice fees regarding the early access of super at $300 and allows advisers to provide a record of advice rather than a comprehensive statement of advice in this circumstance.
The industry welcomes the measures. AFA chief executive Philip Kewin says this is the first step to ensuring members make the best financial decisions for their situation.
In addition, registered accountants are able to give advice to existing clients without the need for a financial services licence.
ASIC temporarily permits superannuation trustees to expand the scope of personal advice as free ‘intra-fund advice’.
“Now, more than ever, Australians need access to quality financial advice. However, given the rapidly changing circumstances, it needs to be timely, relevant and succinct.”
SMSF Association CEO John Maroney agrees: “The decision to access superannuation early is a significant one with a long-term impact on individuals’ retirement savings, so for them to be able to speak to an accountant or adviser for a small fee to get the advice they need without sacrificing safeguards is welcomed.”
Despite these measures, CHOICE Policy and Campaigns Adviser Patrick Veyret says: “It will only be in very rare circumstances that a financial adviser recommending early access of superannuation is doing so in your best interests.”
