The 'superannuation time-lag'

Robin Bowerman, Head of Retail at Vanguard Investments Australia.
Robin Bowerman, Head of Retail at Vanguard Investments Australia.

IT could be called the superannuation time-lag.

Numerous members of large funds typically do not realise until some months later whenever their funds record weak or negative returns for a financial year – after a period of excellent returns. Probably, this would be attributable to the less-positive news not fully sinking in until their six monthly or annual member benefit statements are studied in detail.

And this superannuation time-lag works the other way when markets are strong after an extended period of low or negative returns, and super funds are correspondingly recording strong returns.

The Mercer group observes this time-lag phenomenon in its latest Superannuation Sentiment Index, which examines members’ confidence in super up to last December.

Despite the powerful rebound in the sharemarket from March last year – not overlooking the degree of volatility along the way – the index shows that by December, positive sentiment towards super among those surveyed was markedly lower than 12 months earlier – well before the market had swung into its recovery phase.

The index was based on a survey in mid December of 1,033 working Australians age 25-65.

“Overall, more than half (56%) were fairly, very or extremely worried about the impact of sharemarket volatility on superannuation,” Mercer reports.

“However, evidence suggests a significant increase in the proportion anticipating a higher balance on their next periodic statement,” Mercer adds. [It should be emphasised that research for the index would have been conducted before members received their membership benefit statements for the six months to December 31.]

The findings of the superannuation sentiment index underline the importance of super funds providing quality member education, including keeping their members fully informed in an easily readable way between member benefit statements. Of course, many funds are already doing just this.

And the findings underline why members should be keeping themselves fully informed. Typically, current information is available on the funds’ websites; it is a matter of taking the time to become familiar with the sites.

The sentiment index also reveals some staggering lack of knowledge about super in general among fund members surveyed. Later this week, Smart Investing will take a closer look at this along with some efforts by the tax office and ASIC to provide superannuation education.


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Robin Bowerman, Vanguard Investments Australia's Head of Retail, has more than two decades of experience in the finance industry as a writer, commentator and editor.

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