Why is my superannuation dropping?

As mentioned above, the money you contribute to your super is invested for you by your fund. Like all investments, there are always fluctuations in returns. More often than not, the investments generate positive returns and your super balance goes up. But sometimes, often due to share market volatility or economic or geo-political conditions, investment returns will be negative and your super will go down.

Market volatility and declining investment returns are often caused by major global events, such as the global financial crisis (GFC) and the start of the Covid-19 pandemic. In these years, many super funds reported negative returns.

There is often a strong correlation with super investment performance returns and the wider Australian and global investment markets. It’s important to remember that whenever there have been “dips” in global markets over the long-term they have always recovered to record stronger returns than before the dips occurred.

If you are seeing a drop in your super balance, you are not the only one. Super funds, especially those with a growth or balanced investment option, invest in assets like shares and property, which can fluctuate in value. These shares usually provide high returns over long periods of time, but along the way there can be dips and troughs during times of volatility.

Most super funds offer different investment options with different levels of aggressiveness and risk. More aggressive, high growth-focused investment options offer the potential for higher returns but come with a higher risk of negative returns. Conversely, more defensive, less growth-oriented investment options have less potential for high returns, but have lower risk and are more protected against market volatility.

It’s a good idea to review your investment returns from time to time to make sure you are comfortable with the balance of risk and aggressiveness, but in the middle of a market downturn might not be the best time. Keep in mind that super is a long-term investment and, depending on how far away you are from retirement, your super investments may have many years to recover from a negative return. Try not to make decisions that will leave you worse off in the future.

During previous market downturns, some super members moved some of their retirement savings into cash, thinking it would minimise short-term losses. While this strategy may have helped avoid immediate losses, they crystallised the loss and most ultimately missed out on market recoveries and ended up behind where they would have been if they had stayed invested in shares. It is usually a good idea to sit still, ride it out and wait for markets to recover.

It’s important to know that Industry SuperFunds are working hard right now to protect your savings and to take advantage of the recovery so you can get back to growing your nest egg and planning for your retirement. Industry SuperFunds are structured to carry people’s savings through the troughs and peaks of market shocks and have done so many times before. 

Remember even those nearing or in retirement are often relying on their super account to fund their retirement for many years to come.

The best thing you can do is to seek advice from a licenced adviser who can make sure you are best placed to protect your super savings. A good place to start is to contact your Industry SuperFund and ask to speak to one of their specialist retirement advisers.