Super funds to break post-GFC record for second year in a row: SuperRatings predicting a 14.1% gain in 2013

Australia’s baby boomers and retirees will have a little less to worry about this Christmas, as Australia’s superannuation funds are on track to achieve their highest returns since the global financial crisis.

According to research released yesterday from independent agency SuperRatings, superannuation funds had solid returns in October. The agency predicts when the November and December results are added in, the average Australian superannuation balance will have grown 14.1% over the calendar year.

Balanced funds gained, on average, 1.8% in October. Since July, superannuation funds have risen on average 6.9%, and since October 2012 have risen 16.9%.

The big driver of this is shares, with both Australian and international share markets enjoying a bull run in recent months.

But returns across all asset classes were positive in October – even cash options returned 0.2%.

Last year, superannuation returns on balanced funds rose an average of 11.7%. That was an unusually good year. Superannuation balances declined 1.9% in 2011, rose 4.6% in 2010, and 12.9% in 2009 after falling 19.7% in 2008.

Over the past 10 years, superannuation funds have returned 7% per annum on average – just less than half of this year’s expected figure.

The past few years have been a rollercoaster ride for investors, with the bull market of the early 2000s spectacularly crashing in 2008. But SuperRatings founder Jeff Bresnahan says superannuation investors still ended up ahead.

“Australian superannuation funds have continued to deliver returns of 7% per annum, some 4% above prevailing inflation,” he says. “For members who have some time until retirement, this history of longer term performance should provide comfort that fund’s continue to meet their long term objectives.

“For members nearing retirement, however … the actual risk achieved in the lead up to retirement takes on greater significance. The most important planning decision for older members is to ensure that their strategy reflects both their goals and capacity to bear risk.”

A hypothetical $100,000 balance invested in a balanced fund in 2003 would now be worth $195,265, a 95% gain over 10 years. It would have risen rapidly until 2007, before starkly declining to just $124,627 in 2009 before making up the lost ground and then some in the years to 2013.

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