How did your superannuation fare in 2009?

A news article by the Herald Sun on 2 January 2010 (1) discusses superannuation and how it has affected Australians.

The article states that people who were passive and stayed in the 'default balanced investment option' did well and clawed back a lot of the losses of 2008. Over the past seven years to the end of November the median growth option returned earnings in line with the more aggressive high growth option and ahead of the conservative option.

So for the actively engaged, the news is not so good. This mainly includes people who obsessed about their superannuation and changed out of growth and balanced investment options in 2008 and early 2009.

This means they missed out on the bounce in equity markets that started in March and has since added almost 20 per cent to superannuation balances.

Some analysts are predicting a 12 per cent return for the 2009 calendar year for the median default superannuation fund.

The 2009 calendar year may have been reasonably good for most funds but many still posted two consecutive financial years of negative returns, for the first time ever.

As a result people are putting less money into super, and less out.

Have you delayed retirement?

Analysts have stated that the big investment losses of 2008-09 have meant fewer people cashed out their superannuation this year than in previous years less people are retiring.

More people are also cutting back on voluntary superannuation contributions, something that has since started to change. There have been negative returns, but the broad direction is changing and the markets are coming back. So we don't have to lose all of our confidence in the market.

Developments of the past two years have been a wake-up call for many people and their attitude to their super. The global financial crisis burnt a hole in the forehead of many people in their 40s, 50s and 60s. If you are younger, you may have the opportunity to make your money back, but if you had retirement in sight, you were probably really scared by the GFC and the impact it had on your super.

While funds struggle to maintain the confidence of their members, the government is planning a revolution in the system in 2010.

A new superannuation system has been proposed

For most of 2009, Jeremy Cooper, a former deputy commissioner with the corporate watchdog, ASIC, has worked on a new structure for Australia's superannuation system.

Last month his proposals were released, outlining four new superannuation fund segments with the new system based around people's level of engagement.

DISCONNECTED funds would cater for those who have lost track of their super, providing a low-cost, no-frills service for keeping super balances until the person can be found and reunited with their money.

These funds would replace the eligible rollover funds (ERFs), where lost super is now sent. ERFs are often heavy on the fees and not much time is spent looking for lost members.

UNIVERSAL funds would cater for the vast majority of employed Australians who have their retirement savings in default funds, chosen by their employer or under industrial award conditions. These funds will be low-cost, with few investment choices and just basic life and disability insurance cover.

Members will receive minimal reporting from the fund.

Universal funds will be offered by the existing super funds if they meet the required standards.

CHOICE funds are for people who take a greater interest in their super and will provide a "supermarket" of different investment options.

They will feature extra options for insurance, have a comprehensive product disclosure statement and send annual reports to members.

Choice funds will be similar to the sort of super fund to which many people now belong.

SELF-MANAGED funds (SMSF) represent the booming fourth sector of the industry, where the member and the fund trustee are one and the same person.

Jeremy Cooper says he wants to start a conversation about "a new member-oriented model for superannuation which aligns more closely with member interests."

Source

1. J.Bryce, Sweeping changes ahead for super, Herald Sun 2 January 2010

January 2010