Who To Believe On Super?

16 Aug

From ABC Insiders:

BILL SHORTEN: Well in the last two years, and whilst the final figures haven’t come out from last year, Chant West who are one of the organisations who monitor [superannuation fund] returns show that the year before last the returns on average for a balanced fund was 8.9 per cent. The year just passed – 9.2 per cent.

From ABC TV’s Alan Kohler in Business Spectator:

For the past five years the market has given nothing. After the 20 per cent correction between April 11 and August 8, the ASX 200 accumulation index (capital return plus dividends) has now produced a zero five-year return.

From ABC Insiders:

BILL SHORTEN: As an actual investment product super’s done reasonably well over the last 20 years.

From Alan Kohler:

The first fifteen years since the superannuation guarantee legislation was first introduced in 1992 went extremely well. The compound annual rate of return provided by the sharemarket – like manna from heaven – was 15.5 per cent…

Of course, not all that return dribbled into the members’ accounts: the superannuation industry, consisting of advisers, platforms, fund managers and the super funds, were furiously skimming the accounts and getting gloriously rich.

Still, anyone retiring in 2007 was a big winner and didn’t begrudge the skimmers their little portion. Everyone was a winner!

But now life has changed completely. The five-year total return from the sharemarket is zero; the 20-year total return is now below 10 per cent; the ten-year return is just 6.6 per cent. The fees skimmed off by the industry – which of course continue even though the balances have gone backwards – now represent a much larger percentage of the long-term return.

Suddenly accumulation super lacks the vital ingredient of accumulation. And there is a clear risk that the bear market will continue for some time yet, with both Europe and the United States mired in debt.

From ABC Insiders:

BARRIE CASSIDY: So what do you say then to people who got a bit of a fright this week, that they’ve just got to hang in there?

BILL SHORTEN: Well certainly if you’re right at making a decision to retire in the very near future, if you’re a self-funded retiree and you’ve got a portfolio of shares, this has been incredibly tough; just as was the first global financial crisis in 2008.

But I would say that now is not the time to make snap decisions. I would say that in the long run superannuation in the last 10 years, say if you’ve been in an industry fund, it’s been 4 per cent each year. I would say that the shares market generally has performed well in Australia. I do believe that things will improve.

Hmmmmmm.

Question.

Why is it that anyone other than politicians who gives financial advice, has to be licenced to do so, or risk facing the full force of the law?

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