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COVID-19 and your super

Information and support in uncertain times

Last updated: 25 January 2021


Through these extraordinary times, we extend our thoughts to you and your family, especially if you have lost employment or are otherwise experiencing financial and other stress due to COVID-19.

Safeguarding your superannuation sits at the heart of everything we do. As always, the Sunsuper team are continuing to work hard to prudently manage the Fund and your super investment.

 

While you may be concerned about the economic impact of the coronavirus, particularly its effect on your super investment, we encourage you to remember that super is the longest-term investment many of us may ever have. While we have indeed seen negative returns in the past month,  these follow many years of very strong returns, and the longer-term performance of Sunsuper’s investment options remains strong. 

In terms of what you should do right now, for the majority of members, our answer is: nothing. Market downturns, whatever their trigger, are inevitable, and temporary. Every crisis, every downturn, every recession comes to an end bar none. And it is highly likely that this crisis will be no different. Read on for the latest from Sunsuper Chief Economist Brian Parker on the economic impact of the coronavirus, what Sunsuper is doing, what it could all mean for your super investment, and what (if anything) you should consider doing.

Listen to our latest podcasts and audio message

[00:08:21] Anne Fuchs: So before we get into what's all of this mean for our members and their retirement savings? I guess if you could just high level contrast the difference between the last big your economic shock, the world experienced with which was really a bunch of investment bankers taking way too much risk and creating misery and have it for the rest of the world versus are biologically induced chaos. This from coronavirus. What are their...I guess the markers our members need to understand around the difference in those two events. And how then we, then claw our way out of it into recovery?

[00:08:55] Brian Parker: Okay, there's a lot to unpack there. Firstly, if I look at how the world was going into the GFC , and you're right, Look, the GFC was caused by way too many people in way too many countries doing way too many dumb things.

[00:09:11] Anne Fuchs: And greedy?

[00:09:12] Brian Parker: why too much borrowed money and that was the problem. We don't And I'm not saying that we don't have people out there now doing bad things, doing dumb things with borrowed money. We do but it's nothing like the kind of scale that we saw pre GFC. And I think the main takeout main thing to note first is if I look at the underlying health of the economy as we were going into this crisis, I think the world was in better underlying health, and it was, so the fundamentals are better than they were then. We don't have the same sort of financial excesses. If you like that. We had pre GFC we didn't have a bank system that was vulnerable.

[00:09:51] Anne Fuchs: So we have a buffer

[00:09:53] Brian Parker: that I can. And I think they look so the underlying fundamentals of the economy a better going into this crisis that it was going into the GFC, a financial crisis when it hits, takes years to unwind. Whereas when you have a health crisis like this it tends to be a shorter, sharper shock to the economy. At least that's the more recent example. Things like SARS, for example, that people do tend to focus on Yes, you. The hit to the economy was relatively short and it tended to rebound quite quickly. I think it's gonna be more challenging this time around, but you will see a recovery, and the recovery is going to be somewhat faster, I think, quite a bit faster than we saw post the GFC.

[00:10:34] Anne Fuchs: Okay, so if we translate this to people's retirement savings and, I said at the start of this episode, I am worried about members causing financial self harm by moving to cash when they may not need to. Just as a reaction to a lot of the hysteria in the media.

[00:10:51] Brian Parker: Look, that's a good question

[00:10:53] Anne Fuchs: more of a statement, Brian.

In episode 30, Brian covers the global response to the crisis to date, how Sunsuper’s default investment option aims to protect members’ savings in challenging times, and the importance of members seeking financial advice before making any changes to their super investment strategy.

 

And in episode 31, Sunsuper’s Head of Asset Allocation outlines how Sunsuper is responding to the impact of the coronavirus on share markets, including how he and his team construct Sunsuper’s investment portfolios with members’ best interests at heart, how asset allocation works, and how he uses the power of diversification to cushion the blow of market downturns on members’ retirement savings.

Don't miss our future podcast episodes: subscribe and listen through Apple Podcasts and Spotify.

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Listen to Brian’s audio message to members

You can also listen to Brian’s audio message to members.

The situation

At time of writing, financial markets remain under severe pressure from the coronavirus outbreak, now formally designated COVID-19 by the World Health Organisation (WHO). While infection rates in China (the epicentre of the outbreak) have declined significantly, the number of infections outside of China is increasing, particularly in Italy, Korea and Iran. In recent days, the falls in share markets have been compounded by a sharply lower oil price affecting the performance of energy shares. The lower oil price reflects a sharply weaker world economy and hence demand for oil, but also tensions between the world’s major oil producers.

The economic impacts of coronavirus

There is little doubt that the economic impacts of coronavirus on China are likely to be severe – the country’s GDP will almost certainly show a decline in the March quarter. Beyond China, the economic impacts are also likely to be serious: the direct impact of a decline in China’s economy, which accounts for around 16 per cent of world GDP; the indirect impacts through disruptions to supply chains across the Asia Pacific and elsewhere; the impacts on travel and tourism. Here in Australia, we are likely to see more economic impact from the coronavirus than the bushfires, as tourism and education exports are currently being severely disrupted.

What is Sunsuper doing?

At Sunsuper, we don’t invest money on the basis of our own, or anyone else’s short-term economic or market forecasts. We carefully construct portfolios with a view to meeting their medium to long-term investment objectives. For our diversified investment options, we build portfolios that are well diversified across different asset classes, different countries and regions and different industries.

We continue to monitor developments closely and remain in near constant contact with our investment managers across the globe. We have no way of knowing with any certainty how the COVID-19 outbreak will evolve from here, or how the economy and financial markets will evolve over the course of this year. 

Despite this uncertainty, we are not selling shares or other growth assets; we have recently taken the opportunity to modestly increase our exposure to domestic and international share markets across our diversified options in a careful and risk-controlled manner. We have taken this step because after their recent falls, share markets are now much more attractive value than either fixed income or cash investments.

Performance of Sunsuper’s portfolios 

While share portfolios have declined in value, fixed income portfolios have performed strongly: investors have sought safety in government bonds. The performance of our more defensive diversified options – the Retirement and Conservative options – has been considerably better than the Balanced and Growth options, because they have greater exposure to fixed income investments.

And because we maintain substantial exposures to unlisted asset classes property, infrastructure and private capital – all our diversified investment options are less exposed to short-term market volatility than many of our competitors. 

Superannuation is the longest-term investment any of us may ever have. The past month has seen negative returns, but this follows many years of very strong returns. The longer-term performance of Sunsuper’s investment options remains strong. 

What should members do?

For the majority of members the answer is: nothing

Market downturns, whatever their trigger are inevitable, and temporary. Every crisis, every downturn, every recession comes to an end bar none. And it is highly likely that this crisis will be no different. 

For younger members

For those with 15, 25 years or more until retirement, this crisis is one of many they will experience during their working lives. The compensation for accepting the kind of short-term market turmoil we are currently experiencing is higher long-term returns. And market downturns provide opportunities for Sunsuper and our investment managers to acquire assets at lower prices on behalf of members. That is exactly what we pay them to do.

For older members

It’s important to remember that we all hope to live a long time, and in order for our wealth to last as long as possible, we need to maintain some exposure to growth assets – such as shares. However, it’s generally not a good idea to have excessive exposure to shares – a sharp downturn just prior or just after to retirement can do significant damage to retirement plans.  That’s why in Sunsuper’s default option – the Lifecycle Strategy - we automatically and gradually reduce your exposure to growth assets such as shares as you approach retirement. We do that to reduce the impact of market downturns on your retirement. So, if you’re close to retirement and in our default option you may not need to do anything at all. 

For those members who feel they may be over exposed to shares and are very worried about the impact of this downturn on their retirement, they may need to consider moving to a more conservative strategy. However, there are two key things to remember:

1. Moving to a more conservative strategy now, after markets have declined, locks in a loss of capital.

2. A more conservative strategy by its nature delivers lower long-term returns, and is not likely to capture the full benefit when share markets eventually (and inevitably) recover. 

Before making any change to your investment strategy, we’d encourage all of our members to speak to one of our qualified financial advisers, or if you already have a financial adviser outside of Sunsuper, please seek their advice.

To speak to a Sunsuper financial adviser, please call us on 13 11 84.

Past performance is not a reliable indication of future performance. Sunsuper employees provide advice as representatives of Sunsuper Financial Services Pty Ltd (ABN 50 087 154 818 AFSL No. 227867) (SFS), wholly owned by the Sunsuper Superannuation Fund.

The government’s temporary early access to super measure for those financially affected by COVID-19 has now ended. You may still be able to access your super early, but only in special circumstances.

The government announced the temporary reduction of drawdown requirements for account-based pensions. This information is relevant for Sunsuper members who have a Retirement income account and Transition to retirement income account.

Approaching or already retired

  • There are things to consider if you’re thinking about moving to a more conservative strategy.
  • Before you make any change to your super investment strategy, you should seek financial advice.
  • To speak with a Sunsuper financial adviser, please call us on 13 11 84.

Retirement far away

  • For the majority of members, the answer on what to do now is: Do nothing.
  • All market downturns are temporary, even if they are severe in the short-term.
  • Before you make any change to your super investment strategy, you should seek financial advice.
  • To speak with a Sunsuper financial adviser, please call us on 13 11 84.

It is likely that your super is invested in more than just shares. So, yes, returns in your super investment were impacted by the market volatility caused by COVID-19, but they won't have been as sharply affected as the performance of share markets.

We understand that the global uncertainty caused by COVID-19 might leave you with some questions about your insurance with Sunsuper.

Watch the updates and read the latest from our Chief Economist on what’s happening in financial markets, what Sunsuper is doing, what it could all mean for your super investment, and what (if anything) you should consider doing.

Past performance is not a reliable indication of future performance. Sunsuper employees provide advice as representatives of Sunsuper Financial Services Pty Ltd (ABN 50 087 154 818 AFSL No. 227867) (SFS), wholly owned by the Sunsuper Superannuation Fund.