Was your super fund a loser or a legend in 2022?

What a week in wealth. Inflation has taken another surprise jump up, which means interest rates will – for now – keep going up. And that means your precious super nest egg could go down.

But there is a little to unpack in all that.

If there are two things the sharemarket hates, they are higher interest rates and uncertainty. Unfortunately, it looks like we are heading for both.

A quick fund audit and some super ‘sale’ shopping might dramatically improve your future fortunes.Credit:Dionne Gain.

Given that your super is, to some extent, invested in shares (usually, a lot if you are far from retirement and little if you are just years away), that’s not good.

But there are some big caveats.

The first cause-for-panic pause is that in the last tumultuous year, your super probably fared okay, or at least it should have: the median return for a balanced fund, with about 70 per cent of its investments in the shares, lost just 4.8 per cent according to performance trackers Lonsec.

Of course, the range between the rockstar and, to put it bluntly, rat-shit funds is always large.

And that’s a great segue into thinking about a super intervention for the New Year.

Fix your fundie

You need to be aware that this marks only the fourth calendar year since 2000 when the median balanced super fund has gone backwards. It’s a big red flag if yours has lost money in more years than this.

The problem last year was that the ‘balancing’ assets in a balanced fund have, unusually, declined at the same time. Usually shares and other assets – for example, bonds – operate inversely, so if shares go up in value, bonds go down.

A quick fund audit and some super ‘sale’ shopping might dramatically improve your future fortunes.

Even so, over the long term, the median balance fund has still returned 6.1 per cent annually since 2000, and that’s the benchmark by which you need to judge your fund, or at least over the long term.

Looking at the best and worst-performing funds for last year, the disparity is laid bare. It is happy days if you are currently a Perpetual WealthFocus Perpetual Balanced Growth Fund member – it returned the most of all funds over the past calendar year: 1.7 per cent.

By the time you drill down to the 20th-best one-year performer, super members lost 4.4 per cent. Bear in mind there are a lot below that.

But looking long term, as you should, did your fund meet the decade grade?

Perpetual’s fund, from above, returned only an annualised 6.9 per cent over 10 years. Over the past decade, it is instead the Hostplus Balanced Fund that comes top, with an impressive 9.1 per cent a year.

But there are many funds just a whisker behind that performance.

AustralianSuper (Balanced) members have made 8.8 per cent, Australian Retirement Trust (Super Savings – Balanced) 8.6 per cent, UniSuper (Balanced) 8.4 per cent, Cbus (Growth MySuper) 8.4 per cent, CareSuper (Balanced) 8.3 per cent and Hesta (Balanced Growth) 8.1 per cent.

The next-best, equal performers were Hostplus (Indexed Balanced), Vision Super (Balanced Growth) and Aware Super (Growth), all chalking up an annual 8 per cent for the decade.

Over the past decade, the top 10 super funds all delivered a return of 8 per cent or higher.

Is your fund not on that legends list? Not to worry, there are also a tonne that came close.

You were also in good hands with Equip MyFuture (Balanced Growth), TelstraSuper (Balanced) and IOOF Employer Super Core, all adding 7.9 per cent a year.

And the funds that rounded out the top 20 all put on more than 7.5 per cent annually too. A nod to Prime Super (MySuper), Spirit Super (Balanced MySuper), BUSSQ Premium Choice (Balanced Growth), Qantas Super Gateway (Growth), legalsuper (MySuper Balanced), First Super (Balanced) and Catholic Super (Balanced Growth MySuper).

I know that is a lot to list. But the point is that many super funds have held up and done well for members over the longer term. It is such a proven-over-time fund that you want in charge of your retirement savings.

But that’s not all you need to do.

Sort your strategy

Super offers the best tax perks around, or at least the best unless you are a multinational company availing itself of tax havens.

Money you put in attracts only a 15 per cent contributions tax, versus a marginal tax rate of potentially 45 per cent. Within the fund, returns are concessionally taxed and your withdrawals when you reach age 60 are usually tax-free.

You snare that 15 per cent, effectively cut-price income tax rate on employer contributions and on any contributions you make via salary sacrifice – an idea worth considering.

If there are two things the share market hates, they are higher interest rates and uncertainty. And unfortunately, it looks like we are heading for both.Credit:Louie Douvis

Jump on moneysmart.gov.au’s excellent super calculator and see how much difference even 2 per cent extra might make to your ‘fun funds’ at retirement. Remember, tax-wise, you will make more of your money.

This year, you should also look at working the system with small after-tax contributions, as there are both further immediate tax breaks and free contributions on offer.

Investigate the co-contribution, a free contribution of up to $500 from the government for workers on less than $57,016 who put in $1000 themselves.

Even if someone is not earning, or earning less than $40,000, perhaps because they are caring for kids, a spouse contribution of $3000 could net the contributor as much as a $540 instant tax offset.

You should aim to avail yourself of these opportunities every year but, this year, it could be considered that shares are at a discount.

A quick fund audit and some super ‘sale’ shopping might dramatically improve your future fortunes.

• Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.

Nicole Pedersen-McKinnon is the author of How to Get Mortgage-Free Like Me. Follow Nicole on Facebook, Twitter or Instagram.

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