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Super returns tick up in February on positive inflation news

By Jessica Penny
4 minute read

Super returns maintained their momentum in February as confidence that inflation is coming under control continued to build.

SuperRatings reported on Wednesday that the median balanced option generated a return of 1.8 per cent for February, after rising 1.1 per cent in January.

The February result brings the return to an estimated 6.7 per cent for the median balanced option after the first 8 months of the financial year, which, the ratings agency said, is a “pleasing outcome given market uncertainty”.

“Superannuation funds have had a strong run since late last year with the positive February result being the fourth consecutive month of gains” commented Kirby Rappell, executive director of SuperRatings.

The median growth option gained an estimated 2.3 per cent for the month, while the median capital stable option also rose by an estimated 0.7 per cent.

“While the trajectory of inflation and central bank interest rates maintains market uncertainty, super funds continue to deliver gains for member balances, supporting stronger retirement outcomes,” said Rappell.

“Super fund returns remain much less volatile than equity markets demonstrating the benefits of diversification and the ability of funds to weather these markets conditions with competitive outcomes for their members,” he added.

Pension returns also grew over February, with the median balanced pension option increasing by an estimated 1.9 per cent. The median capital stable pension option is estimated to have grown by 0.7 per cent over the month while the median growth pension option is estimated to increase by a 2.5 per cent for the same period.

APRA data

With total super assets under management falling into negative territory in the September quarter, 2023 closed on a high.

Superannuation assets rose 3.8 per cent per cent in the December quarter to $3.7 trillion, according to the latest Australian Prudential Regulation Authority (APRA) quarterly data.

On a yearly basis, total super assets added 10 per cent throughout 2023, growing from $3.4 trillion at the end of 2022.

The December gains compared to a marginal decline of 0.1 per cent over the September quarter, driven by a rise in member benefit payments as well as negative investment returns in the quarter that offset positive inflows.

The prudential regulator attributed this latest rise to strong growth in APRA-regulated funds and strong returns from financial markets.

Some $2.6 trillion was held in APRA-regulated assets and while the body did not disclose how much of this was in MySuper products, both the June and September quarters saw 12-month growth surpassing 12 per cent.

Industry super funds held $1.27 trillion, followed by retail ones at $713 billion and public sector at $534 billion.

Corporate funds, meanwhile, made up just $47.3 billion, down from $56.5 billion last quarter.

Moreover, the rate of return (ROR) for entities with more than six members for the December quarter increased by 4.3 per cent since.

APRA said that this was driven by strong growth in financial markets, particularly equities, as the ASX 300 index finished the quarter near all-time highs.

Looking at the full calendar year, benefits paid out reached $111.1 billion over 2023, compared with $91.43 billion in 2022. This comes just shy of the record high of $112.96 billion that was paid out over a rolling 12-month period during COVID-19.

According to the prudential regulator, this 21.5 per cent increase was the result of lump sum payments rising by 26.3 per cent to $63.2 billion and pension payments increasing by 15.7 per cent to $47.9 billion.

Meanwhile, total contributions increased by 11.7 per cent to $172.6 billion in the year ending in December 2023, with employer contributions increasing by 13 per cent over the year to $129.9 billion.

“The significant growth in employer contributions over the year was driven by the increase in the Superannuation Guarantee to 11 per cent and a 3 per cent increase in the number of people employed,” APRA said.

Members contributed $8.2 billion in the quarter and $42.7 billion in 2023, which was 8 per cent higher than the previous year.

On the self-managed super fund (SMSF) side, these held $913.7 billion, up 6.9 per cent from $854.6 billion at the end of 2022. However, it was a decline from the September quarter when SMSF assets were $884.6 billion.