CRAIG BINNIE, CHRISTOPHER RUSSELL June 19, 2008 12:30am
SUPERANNUATION funds are poised to post their biggest loss in 20 years after being rocked by falling stock markets.
The markets plunge has wiped an estimated $50 billion off the value of workers' retirement savings. But analysts say the fall is minor when compared with the 50 per cent gain that funds have produced since 2003. "It's a pretty big drop but you have to put it in perspective," Jeff Bresnahan, managing director of research house Superratings, said yesterday.
Superratings figures show that balanced funds have suffered a 5.2 per cent decline so far this financial year.
Mr Bresnahan said returns would vary dramatically from fund to fund due to what assets were invested in and the fees charged.
He said super funds had been down 7 per cent at the start of the year but had recovered in line with stock markets to be about 2.5 per cent down at the end of May.
However, this month's stock market slump has wiped out much of these gains.
Financial Planning Association state chairwoman Kerrin Falconer said it was important to take a long-term view of superannuation.
"For young investors who only started working in the past few years, this may be the first year that they've ever seen a negative return," she said.
"But their investments will be there for 30 or 40 years – and there will be peaks and troughs along the way. For people who are older, we need to remember we've had five really good years.
"So just because this year is slightly down, there is no reason to panic."
Mr Bresnahan also warned against pulling out of super without a good reason.
"If the ASX moves a couple of hundred points, then that translates into a couple of per cent in a super fund and the market can move 200 points in a day, so it can recover very quickly," he said.
"If you are trying to time the market, trying to jump in and out of cash and shares and balanced funds, it is a bloody hard game and generally adds up to not a win."
To put the decline in perspective, Mr Bresnahan said an investor with $100 in a fund in 2003 would have had seen it rise to about $160 then slip to $155.
"If someone had said to investors five years ago `we will give you 50 per cent between 2003 and 2008' everyone would have said `yes' and that is effectively what has happened," he said.
