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Super funds set to deliver again in 2020

Super members have good reason to be optimistic about what 2020 might deliver to their balances but they should not expect the same fat returns as last year, a research house says.

SuperRatings says 2019 was the best year for superannuation funds since 2013, with the median balanced option returning 13.8 per cent.

Despite a December sell off in local shares, funds entered the new year in a strong position, it said.

“We’re anticipating a solid year for super in 2020, but the key challenge for funds will be the low return environment,” SuperRatings executive director Kirby Rappell said.

“Even with the possibility of a pickup in economic growth, yields are extremely low and it’s getting harder to find opportunities in the market.”

He said it will be more challenging fundamentally than in 2019 because company earnings growth was slowing, and Australian consumers are under pressure.

“That doesn’t mean it will be a bad year, but super members should not expect to bank another 13 per cent.”

For people already retired, pensions performed well in 2019.

The median balanced option returned an estimated 14.9 per cent over 2019, compared to 18.2 per cent for the growth option and 8.0 per cent for the capital stable option.

There were a number of mergers in 2019 and SuperRatings expects more in 2020 as funds come together to achieve greater scale.

Disclosure Statement: ClearView Financial Advice Pty Ltd ABN 89 133 593 012 AFSL No. 331367 | Matrix Planning Solutions Limited ABN 45 087 470 200 AFSL & ACL No. 238256. Head Office: Level 14, 20 Bond St, Sydney NSW 2000 General Advice Warning: This information is of a general nature only and has been prepared without taking into account your particular financial needs, circumstances and objectives. While every effort has been made to ensure the accuracy of the information, it is not guaranteed. You should obtain professional advice before acting on the information contained in this publication. You should read the Product Disclosure Statement (PDS) before making a decision about a product.

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Australia remains one of only nine nations to hold a AAA credit rating

February 25, 2021

Colin Brinsden, AAP Economics and Business Correspondent
(Australian Associated Press)

Global credit agency Fitch Ratings has affirmed Australia’s top-tier AAA rating, saying the economy has weathered the COVID-19 pandemic well, reflecting a successful virus containment.

Treasurer Josh Frydenberg jumped on the announcement, saying Australia remains one of only nine nations to hold a AAA credit rating.

“Fitch says we have ‘weathered the pandemic well compared with peers’ and ‘Australia’s labour market appears to be on a stable path to recovery, supported by the JobKeeper program’,” Mr Frydenberg tweeted.

However, Fitch has kept Australia’s rating on a negative outlook, reflecting uncertainty around the medium-term debt trajectory following the significant rise in public debt caused by the response to the pandemic.

“Policy settings are set to remain accommodative, although we project the bulk of fiscal stimulus has now passed,” Fitch said in a statement on Monday.

“Risks remain tilted to the downside, reflecting the possibility of additional and broader lockdown measures to contain any resurgence of the virus.”

However, the vaccine rollout should gradually ease these risks over the year and support domestic sentiment, it said.

Australia’s nationwide vaccine rollout started on Monday.

Shadow treasurer Jim Chalmers said by sticking with the negative outlook, Fitch is signalling there is still a long way to go in Australia’s recovery.

“The biggest threat to our recovery is Scott Morrison and Josh Frydenberg prematurely declaring victory,” Dr Chalmers told AAP. “(This ignores) the fact that over two million Australians still don’t have work or enough work, wages are stagnant, and our economy had become less dynamic and resilient well before the pandemic.

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A financial safety net through your superannuation

January 28, 2021

Moneysmart
(ASIC)

More than 70% of Australians that have life insurance hold it through super. Most super funds offer life, total and permanent disability (TPD) and income protection insurance for their members.

When reviewing your insurance, check if you’re covered through your super fund. Compare it with what’s available outside super to find the right policy for you.

Types of life insurance in super

Super funds typically offer three types of life insurance for their members:

  • life cover — also called death cover. This pays a lump sum or income stream to your beneficiaries when you die or if you have a terminal illness.
  • TPD insurance — pays you a benefit if you become seriously disabled and are unlikely to work again.
  • income protection insurance — also called salary continuance cover. This pays you a regular income for a specified period (this could be for 2 years, 5 years or up to a certain age) if you can’t work due to temporary disability or illness.

Most super funds will automatically provide you with life cover and TPD insurance. Some will also automatically provide income protection insurance. This insurance is for a specified amount and is generally available without medical checks.

Cancellation of insurance on inactive and low balance super accounts

Under the law, super funds will cancel insurance on inactive super accounts that haven’t received contributions for at least 16 months. In addition, super funds may have their own rules that require the cancellation of insurance on super accounts where balances are too low.

Your super fund will contact you if your insurance is about to end.

If you want to keep your insurance, you’ll need to tell your super fund or contribute to that super account.

You may want to keep your insurance if you:

  • don’t have insurance through another super fund or insurer
  • have a particular need for it, for example, you have children or dependants, or work in a high-risk job

Insurance for people under 25

Insurance will not be provided if you’re a new super fund member aged under 25 unless you:

  • write to your fund to request insurance through your super
  • work in a dangerous job – you can cancel this cover if you don’t want it.

Use our Life insurance calculator

Work out if you need life insurance through your super and how much cover you might need.

Superannuation and insurance can be complex. If you need help call your super fund or speak to a financial adviser.

Pros and cons of life insurance through super

Pros

  • Cheaper premiums — Premiums are often cheaper as the super fund buys insurance policies in bulk.
  • Easy to pay — insurance premiums are automatically deducted from your super balance.
  • Fewer health checks — Most super funds will accept you for a default level of cover without health checks. This can be useful if you work in a high-risk job or have health conditions that can make it difficult to get insurance outside super. Check the product disclosure statement (PDS) to see the exclusions and treatment of pre-existing conditions.
  • Increased cover — You can usually increase the amount of cover you have above the default level. But you’ll generally have to answer questions about your medical history and do a medical check.
  • Tax-effective payments — Your employer’s super contributions and salary sacrifice contributions are taxed at 15%. This is lower than the marginal tax rate for most people. This can make paying for insurance through super tax-effective.

Cons

  • Ends at age 65 or 70 — TPD insurance cover in super usually ends at age 65. Life cover usually ends at age 70. Outside of super, cover generally continues as long as you pay the premiums.
  • Limited cover — The amount of cover you can get in super is often lower than the cover you can get outside super. Default insurance through super isn’t specific to your circumstance and some eligibility requirements may apply.
  • Cover can end — If you change super funds, your contributions stop or your super account becomes inactive, your cover may end. You could end up with no insurance.
  • Reduces your super balance — Insurance premiums are deducted from your super balance. This reduces your savings for retirement.

Check your insurance before changing super funds. If you have a pre-existing medical condition or are over age 60, you may not be able to get the cover you want.

How to check your insurance through super

To find out what insurance you have in your super you can:

  • call your super fund
  • access your super account online
  • check your super fund’s annual statement and the PDS

You’ll be able to see:

  • what type of insurance you have
  • how much cover you have
  • how much you’re paying in premiums for the cover

Your super fund’s website will have a PDS that explains who the insurer is, details of the cover available and conditions to make a claim.

If you have more than one super account, you may be paying premiums on multiple insurance policies. This will reduce your retirement savings and you may not be able to claim on multiple policies. Consider whether you need more than one policy or whether you can get enough insurance through one super fund.

Before buying, renewing or switching insurance, check if the policy will cover you for claims associated with COVID-19.

When reviewing your insurance in super, see if there are any exclusions or if you’re paying a loading on your premiums. A loading is a percentage increase on the standard premium, charged to higher risk people. For example, if you have a high-risk job, a pre-existing medical condition or you’re classified as a smoker.

If your super fund has incorrectly classified you, contact them to let them know. You could be paying more for your insurance than you need to.

NewsPages

Jobs down but construction work improving 

November 4, 2020  

Colin Brinsden, AAP Economics and Business Correspondent 
(Australian Associated Press) 

Employment and wages growth continues to weaken despite some positive signs in the economy, with the construction sector expanding for the first time in two years. 

Payroll jobs fell 0.8 per cent in the fortnight ending October 17 following a 0.9 per cent drop in the previous two weeks. 

Compared to the beginning of the coronavirus pandemic in March, payroll jobs have fallen 4.4 per cent. 

Wages also fell by 2.1 per cent in the latest reported fortnight to be down 5.1 per cent since March. 

At the same time, retail trade fell 1.1 per cent in September, the Australian Bureau of Statistics has found. 

However, retail turnover jumped 6.5 per cent over the September quarter, a solid result for the economic growth calculation due in December. 

“This confirms that outside of Victoria, where volumes fell 4.2 per cent as a result of the lockdown, the recovery in household spending is well underway,” BIS Oxford Economics chief economist Sarah Hunter said. 

Cutting the cash rate to a record low 0.1 per cent on Tuesday, Reserve Bank governor Philip Lowe said the economic recovery is up and running and the September quarter national accounts will show positive growth. 

The construction industry is another sector that appears to have turned a corner, buoyed by house building and less pronounced declines in apartment and engineering works. 

The Australian Industry Group/Housing Industry Association performance of construction index rose 7.5 points in October to 52.7, indicating a mild expansion in the sector. 

The index has breached the 50-point mark for the first time since 2018. 

HIA executive director Geordan Murray said low interest rates, government grants and other fiscal stimulus measures were lifting demand for detached housing. 

“These are positive signs that policy settings are working to generate employment throughout the initial phase of the economic recovery,” Mr Murray said. 

Dr Lowe said with Australia facing a period of high unemployment, the central bank was committed to doing all that it could to support the creation of jobs. 

The cut in the RBA’s cash rate would save more than $30 a month on a $400,000 variable rate mortgage if passed on in full by retail banks. 

But the Commonwealth Bank, the nation’s largest retail lender, has instead cut its fixed-rate home loans and some business loan rates and left its variable rate unchanged. 

The other three major banks have remained silent. 

However, a handful of smaller banks have cut their variable rates from between 0.10 per cent and 0.20 per cent with immediate effect

News Pages

Big spend as Frydenberg goes for growth

October 7, 2020

Colin Brinsden, AAP Economics and Business Correspondent
(Australian Associated Press)

Despite Josh Frydenberg’s gigantic spend-up, his second budget contained very few big surprises after the carefully crafted run-up to the treasurer’s big night.

In the past week or so, big, multi-billion dollar initiatives have been announced on a daily basis, from an apprenticeship initiative to giving the regions and tourism a cash injection.

The bringing forward of already legislated tax cuts, due in 2022, has been flagged for months.

Even so, the spend-a-thon that will see the budget deficit balloon to a record $213.7 billion and government debt exceed $1 trillion for the first time is aimed at digging the economy out of recession and getting people back into work.

The budget is forecasting a huge acceleration of economic growth in the next financial year, from a contraction of 1.5 per cent in 2020/21 to brisk 4.75 per cent expansion.

From there on growth is expected to hum at a rate of 2.75 per cent to three per cent, something that has not been seen for a while.

There is also hope that unemployment is not far from its peak, with Treasury now predicting a top of eight per cent later this year, rather than nine per cent, and by 2023/24 falling to 5.5 per cent.

But there is a big assumption to this somewhat healthier outlook, given how deep Australia’s first recession in three decades has been.

It relies on there being a COVID-19 vaccine by the end of 2021.

Mr Frydenberg explained if a vaccine is found six months earlier, that would give a $34 billion boost to the economy.

But he also warned if there was a second or third wave of virus cases in Australia, that could hurt the economy by $55 billion.

“There is a lot of uncertainty in this economic environment, it’s an unprecedented time,” he told reporters.

“We are leaving no stone unturned to get access to the vaccine.”

In the meantime, the government is racking up a huge bill trying to keep life on an even keel in these uncertain times.