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Don’t let hasty decisions erode your superannuation


Published 9 April 2020

As the COVID-19 virus impacts markets, Australians are worried about the impact on their super. We profile a retiree who cautions against acting too hastily in reaction to the volatility. 

As the COVID-19 virus impacts markets around the world, Catherine*, a 69-year-old retiree, is dreading her next superannuation statement. A former customer service representative and now retired for 11 years, Catherine expects to find her life savings have fallen in value.

“I’ve got no interest in looking at it, I’m sure it’s going to be awful,” she says. “I don’t know what’s going to happen in the future, but hopefully this will be over soon.”

Many Australian retirees will relate to her anxiety. But Catherine’s fears are tempered by a mistake she made during the last big downturn. The Global Financial Crisis (GFC) of 2007 to 2008 arrived a year before she was due to retire. Reacting to blaring media headlines and widespread panic, she converted all of her super into cash in an attempt to stop her balance from falling.

“At the time I was really scared that my balance would go down,” Catherine says. “I knew I had to rely on this superannuation for the next 20 or 30 years.”

Around a week later she spoke to someone at her super fund and took their advice to convert a portion back to shares, which would likely rise in value in the long run. Afterwards, she realised her hasty decision cost her thousands of dollars due to missing out on some of the rebound and the transaction costs involved.

Catherine believes her balance today is lower than it would have been if she had done nothing at all. She advises other retirees: “Don’t do it yourself until you talk to an expert.”

Confidence is vital to the smooth functioning of markets and the returns they deliver to investors. COVID-19’s impact on supply chains, businesses and the daily lives of people around the world, has reduced confidence on a large scale, causing markets to endure some of their worst performances since the GFC.

Despite the Australian government stepping in with stimulus packages and lower interest rates, a recession (defined as six months of negative economic growth) could be coming. This will bring enormous challenges to the daily lives of Australians, and some will be tempted to make reactive decisions concerning their superannuation.

But retirees and superannuation fund members in general must remember the basic principles of investing for the long term in a diversified portfolio. While investments in one part may suffer losses, other parts may hold or even increase their value. Markets sometimes fall sharply, but they also rise rapidly at times that nobody can predict. Over the long term, short-term volatility doesn’t tend to matter.

News of a slowdown in the spread of the virus, or the development of a vaccine, could deliver a sudden shot in the arm to share markets. Those who cash out now will turn their ‘on-paper’ losses into real losses, and could miss out on potential gains.

Life is hard right now for everyone, including Catherine. With supermarket shelves cleared of budget goods, she and her husband have been forced to buy more expensive brands which double or even triple their grocery bill. The mental and emotional stress of the situation is also taking a toll with many people feeling like their health is endangered, or concerned that they could place the health of others at risk.

But markets have recovered after previous downturns in history, and they are likely to recover this time as well.  When that happens, the winners will be those who take a calm and considered approach.

Name has been changed to protect privacy. 

“ANZ Smart Choice Super” is a suite of products consisting of ANZ Smart Choice Super and Pension (PDF 113kB)ANZ Smart Choice Super for employers and their employees (PDF 122kb) and ANZ Smart Choice Super for QBE Management Services Pty Ltd and their employees (PDF 124kb). The ANZ Smart Choice Super and Pension product is distributed by Australia and New Zealand Banking Group Limited (ANZ) (ABN 11 005 357 522). ANZ Smart Choice Super for employers and their employees and ANZ Smart Choice Super for QBE Management Services Pty Ltd and their employees are MySuper compliant products issued pursuant to the latest PDS available at anz.com/smartchoicesuper. ANZ Smart Choice Super is part of Retirement Portfolio Service (the Fund) (ABN 61 808 189 263) and is issued by OnePath Custodians Pty Limited (ABN 12 008 508 496, AFSL 238346, RSE L0000673) (OPC), the trustee of the Fund. OPC is a member of the IOOF Group of companies, comprising IOOF Holdings Limited ABN 49 100 103 722 and its related bodies corporate. The Australia and New Zealand Banking Group Limited (ANZ) (ABN 11 005 357 522) brand is a trademark of ANZ and is used by OPC under licence from ANZ. ANZ and the IOOF Group of companies (including OPC) are not related bodies corporate. ANZ does not guarantee these products.

Before re-directing your super or moving your money into ANZ Smart Choice Super, you will need to consider whether there are any adverse consequences for you, including loss of benefits (e.g. insurance cover), investment options and performance, functionality, increase in investment risks and where your future employer contributions will be paid. 

This information is of a general nature and has been prepared without taking account of your personal needs, financial situation or objectives. Before acting on this information, you should consider whether the information is appropriate for you having regard to your personal needs, financial circumstances or objectives.

All fees are subject to change. Other key features are relevant when choosing a super fund, including performance.

Taxation law is complex and this information has been prepared as a guide only and does not represent taxation advice. Please see your tax adviser for independent taxation advice. The information on insurance cover is a summary only of the terms and conditions applying to the insurance cover. To the extent there is any inconsistency with the terms of the insurance cover provided by the insurer, the terms of the insurance policy will prevail.

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Fee Analysis: Research conducted by SuperRatings Pty Ltd, holder of Australian Financial Services Licence No. 311880. For a copy of the latest SuperRatings research, click here (PDF 452kB).