The Australian Business Review
27 May 2020
Gerard Cockburn – Business Reporter
Self-managed super funds suffered a $70bn hit from the market turmoil in the March quarter, putting further strain on the retirement savings of investors already battling a crash in interest rates and a rental freeze.
New figures released by financial regulator APRA outline the damage to superannuation with nearly $230bn sliced from to the nation’s super pool, putting the sector back 12 months in total assets under management.
Industry funds, which are generally more exposed to infrastructure, suffered a $54bn hit to asset values in the three months to the end of March, while retail super funds with their higher exposure to riskier assets such as shares were savaged with an $80bn drop in asset values.
But SMSF investors, who generally are exposed to property, shares and cash, suffered the worst hit since the global financial crisis with total assets falling by 9.4 per cent in the March quarter.
The global meltdown in markets triggered an aggressive policy response from central banks around the world, slashing already rock bottom interest rates to new lows.
APRA’s latest figures show the country’s $3 trillion superannuation industry contracted 7.7 per cent, with $227.8bn being lost over the March quarter.
The figures don’t capture the federal government’s early withdrawal of super scheme, which allows Australians to access up to $10,000 both this financial year and the next.
Industry funds are expected to see an additional outflow of funds into the June quarter.
National Senior Australia chief advocate Ian Henschke, said self-funded retirees were still coming to terms with the economic shocks sparked by COVID-19, with some members only just recovering from losses incurred during the global financial crisis.
“They (self-funded retirees) feel they are being forgotten and must simply accept this,” Mr Henschke said.
“They are not necessarily wealthy, but receive little or no assistance and despite the huge hit to their income are not eligible for the pension because their asset values have changed little so far.”
Mr Henschke noted some SMSF retirees were being forced to sell shares at low prices just to supplement foregone income — including relief on rental properties — further diminishing the size of their portfolios.
SMSF Association policy manager Franco Morelli said APRA’s figures were lower than expected within the industry, which had estimated the hit to the sector could see assets fall by as much as 30 per cent.
“The next quarter up to June will be interesting, as there is so much uncertainty,” Mr Morelli said.
However, he said the SMSF sector could react quicker to rebalance than other sectors. “We have a much larger cohort of individuals allocated to more liquid funds,” Mr Morelli said.
The halving of the pension drawdown rate by the federal government in March has helped self-funded retirees to top up their pension.
Total superannuation assets at the end of the March quarter stood at $2.73 trillion — nearly twice the nation’s economic output.
Public sector funds were the relative best performers during the March quarter with total assets falling just under $10bn to $523.6bn.
Industry funds make up the single biggest sector with $717bn under management, while the collective assets held by SMSFs fell back to $675.6bn. Retail funds totalled $558bn at the end of March.
Superannuation contributions rose 6.9 per cent to $121.1bn compared to the same quarter in the previous year, while the total paid in benefits was $85.8bn, a rise of 14.5 per cent.
Net inflow of funds compared to March last year increased by 27.7 per cent to $45.4bn.
Self-managed Independent Superannuation Funds Association managing director Michael Lorimer said the impacts to financial markets were experienced at the tail end of the quarter. He said APRA’s next round of data would likely show some signs of recovery, as market performance had started to rebound.