Will supers survive the COVID-19 crisis without major losses?
Published 23 Jun 2020
In a case of turning against the difficult financial head-winds created by the global COVID-19 pandemic, there are increasing signs that superannuation funds could end up without major losses. The New Daily noted that supers have diversified their investments so greatly that even a stock market crash on the level witnessed in recent months has not been able to devalue these funds.
Why haven’t losses been greater?
The New Daily reported that according to Chant West research, it is possible that supers will end up with positive returns for the year. This is obviously in contrast to the damage that has been dealt to major exchanges – markets were down 37% from normal levels during March, when the financial chaos associated with the pandemic was at its height.
The fact that superannuation funds have diversified their portfolios appears to have saved them from suffering the fate of stocks. The New Daily contrasted the most recent economic collapse with the one that followed the 2008 crash. In that case, the stock market fell 44% and super funds dropped 26%. This year, by contrast, the super funds took a hit only 31% the size of the damage to the stock market.
Due to the aforementioned move to more diversity in their investments, superannuation funds now find themselves with a chance for a net-zero performance or, remarkably, positive numbers.
What changes will come to the system?
Those numbers have come out at a time when more Australians are aware of their super funds’ existence and size than ever before. As The Sydney Morning Herald recently explained in an editorial, the decision to allow early withdrawals has made young people see their supers as something tangible and real, rather than a far-off and abstract financial concept. The question now becomes whether this greater attention will have an effect on changes to supers.
The Herald editorial board pointed out that proposed changes, such as an increase to 12% annual contribution or the new ability to withdraw money for home down payments have to be considered carefully. A lack of transparency has led to issues such as a bank quickly and quietly taking away home loan redraw ability as the pandemic broke out.
In one of the most active periods for superannuation funds in years, in the grip of a pandemic-related financial crisis, you need expert assistance to resolve any disputes over the disbursement of money in the case of a fund holder’s death or disability. This is where the superannuation dispute experts at Gerard Malouf & Partners can help you.