Superannuation taking a bit hit from coronavirus

IN its final quarterly report for 2019, the Australian Prudential Regulation Authority valued the nation's superannuation investments at $3 trillion: in other words, $3000 billion, or ten times the $300 billion in combined coronavirus stimulus measures unveiled in recent days by the federal government and the Reserve Bank.

But as anyone who has checked their superannuation account balance will know, the huge financial impact of COVID-19 has suddenly and unexpectedly battered the compulsory superannuation savings of millions of working and retired Australians.

As a result, debate is under way over the impact of the financial shock on the superannuation system.

As well as navigating substantial losses - and not just on paper - super funds must also deal with new laws allowing eligible account holders to withdraw up to $20,000 over two years to replace lost income.

At first glance, the $27 billion the government estimates as the likely amount to be withdrawn through this temporary policy seems like small change next to the $2 trillion invested in for-profit and industry schemes regulated by APRA.

But not all funds have equal investment strategies, and there are concerns over those that have invested directly in infrastructure, which may not be able to easily meet their members' calls for cash.

The irony in this is that the superannuation sector - which soaks up 9.5 per cent of the national wage bill every year - has been encouraged to invest in the very assets that its critics are now finding fault over.

Many wealthier Australians, and those with more financial literacy, may have already moved to adjust their super as best they can.

For the bulk of us, however, super has remained a "set and forget" account that seems somewhat removed from our daily lives, at least until retirement looms.

Funds are generally warning against switching to more defensive investment settings - especially to cash - saying that to do so would be to miss the upswing that must eventually follow the present rout.

But given it took the ASX All-Ordinaries index of Australia's 500 largest companies until June last year to regain its 2007 peak before the global financial crisis, a full recovery will likely take some years.

With more COVID-19 economic pain certain to come, this is not a time to find fault with individual funds, but for the sector, and the government, to work together.

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