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Poor Results for Super for the 2016 Financial Year

Most industry superannuation accounts will have staggered, exhausted to the end of the 2016 financial year with a slightly positive result. Median balanced accounts — those with exposure of between 60 per cent and 76 per cent to growth assets — where up to 70 per cent of Australians have their money, will have gained only about 2.3 per cent over the 12 months.

Median industry super fund balanced accounts, where up to 70 per cent of Australians have their money, will have gained only about 2.3 per cent over the past 12 months according to SuperRatings. However, even this small return, barely above the rate of inflation, is better than the stock market. Total returns on Australian shares, as measured by the All Ordinaries Accumulation index, were just 0.6 per cent in 2015-16, well below the 20-year average 10.8 per cent. In what can be likened to a title fight, super funds have had to withstand markets that dragged them into negative territory in six out of the 12 months, including a late Brexit onslaught, which helped drag the funds down by around 1.3 per cent in the month of June.

But the result is still the seventh consecutive positive result for industry super funds since the depths of the global financial crisis (GFC). From the perspective the range of the same returns have been 100% to 200% more for our clients under advice that utilize superannuation wrap services. These results have been net of fees and not gross returns as reported by SuperRatings. As we see it, there is tremendous value in have an adviser best position you to make the best possible super fund returns.

Interestingly, SuperRatings says results from industry super funds to be in the range between minus 1 per cent and positive 6 per cent.

Here's how industry super has performed since compulsory contributions started in 1992:

An average return of 7 per cent sees a super balance double about every 10 years. The estimated median balanced option return of 2.3 per cent for 2015-16 is the lowest since 2011-12, when funds returned just 0.4 per cent. However, in all other years since the GFC, funds have performed above expectations. SuperRatings says the 10-year returns are not quite hitting a target return of CPI plus 3.5 per cent target.

At Heart, we expect 2016-17 will continue to present significant challenges and returns around 3-4% net of fees is the likely to be range of returns moving forward. The longer-term view is that performance should continue to hold strong. There is continued volatility experienced in financial markets and an expectation it will be ongoing for some time to come. This year has resulted in subdued returns and, with this in mind, our clients should be more than pleased with the positive results achieved.

“We have not taken into account any particular persons objectives, financial situation or needs. Investors should, before acting on this information, consider the appropriateness of this information having regard to their personal objectives, financial situation or needs. We recommend investors and consumers obtain financial advice specific to their situation before making any financial decision.”

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