SUPERANNUATION

You may soon be asking about your superannuation. The share market has taken a big hit, affecting super funds significantly. What does it mean for us? The answer depends on your super arrangements.
First you can be assured that the funds have ample cash to pay members.
Secondly defined benefit fund members will still get their defined benefit - no change.
Those with accumulation funds have been hit (falling and rising wildly), but unless you need to cash out now, history tells us that the funds will grow again.
We will expand on this in future bulletins.

SUPERANNUATION - PART 2
Last week we provided an overview. Now we will address some details. You can be assured that the funds have ample cash to pay members.
Over the past years, funds were required to increase their liquidity (cash availability).
The most obvious way to do this was to put money into banks or bonds - unfortunately interest rates are low but it a secure investment.
Secondly equities (such as shares) can be converted to cash - but they are considered a higher risk as the share markets can turn around.
Funds typically will have significant investments in equities, both in Australia and Internationally.
Risk management is also a bread and butter issue for funds. They have factored in downturns - using the GFC in 2008 as a yardstick. So liquidity should not be a problem.

SUPERANNUATION - PART 3
There are many ways to describe superannuation funds. They fall into three main categories. By far the most popular is an "accumulation" fund. Some workers will belong to "defined benefit" funds. There is a smaller category of "pension" funds. The brief description of each is as follows:

Accumulation Benefit: Your benefit is a lump sum and the amount depends on contributions by you and the employer, and by the performance of the investments.

Defined Benefit: Your benefit is a lump sum and the amount is determined by a formula - usually based on final salary and years of service. - Fund performance does not affect your benefit.

Pension Benefit: Your benefit is a pension and the pension usually depends on your final salary and years of service. This is often complex. Some pensions are determined by a defined benefit.

Many members in Post and Telstra will be members of the company "defined benefits" funds. These are the Telstra Super Scheme (TSS) and the Australia Post Super Scheme (APSS). A small number of members will be members of the Commonwealth Super Scheme (CSS).
It is important to note that members who belong to these employer scheme will have membership of both the" defined benefits" scheme AND an "accumulation" scheme.

SUPERANNUATION PART 4
Accumulation Funds: Most members will have a full or partial accumulation fund.
It is a lump sum scheme. The lump sum is paid when you exit the scheme. The balance to be paid to you will vary from day to day.
You can access your fund via the internet and see your daily balance. The variation is caused primarily because you will have exposure to shares.
Most funds have a "balanced option" and many use this option. This is generally expressed as investment in equal parts in three areas
- shares (equities),
- property and
- cash.

You have the ability to change the allocation between shares, property and cash. With cash rates "Interest" is very low at the moment this is not seen as a good investment, but is a very safe option.
On the other hand, over the past years, the shares have returned 7-8% per annum. However, the share market carries more risk and it dived in recent months.
Many (of us) increased our share percentage because of the good returns.

SUPERANNUATION PART 5
Superannuation must be considered a long term investment. Figures used suggest 6-7% returns per annum over the long term.
But as you have seen this year, there are down turns and upturns. As an example, Australian super reported as follows:

Despite recent market volatility, the Balanced investment option has only declined 3.28% for the financial year-to-date to 30 April 2020. It's also worth noting that Australian Super's PreMixed investment options are above where they were at the start of 2019. And over the long-term, the Balanced investment option has provided returns of 8.00% per annum over the last 10 years to 30 April2020 - after tax and investment fees. That's a cumulative return of 116% over the past decade.

SUPERANNUATION PART 6
Nearly all members will have a superannuation accumulation fund. Many will also have a defined benefit fund. We have tracked one fund for over 12 years and you may be surprised by the results. In our special "Fact Sheet" we track an actual accumulation fund. This may be of interest as it covers the GFC crash in 2008 and the recovery, and the recent Covid19 crash.

Here is a question to consider. The fund still exists. What has been lost? See the Superannuation Analysis - Covid and GFC page where we have posted a lot of numbers and observations.

SUPERANNUATION PT 7
Super works. We have reported previously the performance of super accumulation funds. There were very large gains in the past 12 months, mainly because of the share markets in Australia and overseas. We tracked a real fund over the past 12 years and reported only a very small loss in the 12 months to June 2020. That industry (union) fund has now reported a positive return of 0.22% for the Balanced (MySuper) option for the 2019/20 financial year. This is despite the challenging circumstances that the COVID-19 pandemic has created for financial markets and the global economy in recent times.

More importantly, the long-term returns for our Balanced option remain strong at 8.43% each year over 10 years for super members.

SUPERANNUATION PT 8 - MINISTER DOESN'T CARE ABOUT SUPER
In an extraordinary abdication of her responsibility as the Minister responsible for superannuation, Senator Jane Hume said this morning that she was "ambivalent" about whether the Morrison Government delivered an increase to the super guarantee, which has already been legislated. In the middle of the greatest recession in a century, the Minister is refusing to commit to a legislated commitment which would provide retirement security for millions of working people. The increase has already been delayed by the Abbott Government and should have come into effect in 2015. (ACTU).

SUPERANNUATION PT 9 - UNDER ATTACK
While the Government looks to "review" super contributions, the strength of the industry (union) funds is worth considering. The largest industry fund reports that the long-term performance of its balanced option, where approximately 90% of members are invested, remains strong. For the 10 years to 30 June 2020, the balanced option has delivered a return of 8.77% pa.
Over 20 years it was 7.24% pa. Over the shorter term - the 12 months to 30 June 2020 covering the Covid setback, the return for this was positive 0.52% pa.

SUPERANNUATION PART 10 - BINDING NOMINATIONS
Above we explained that a binding nomination will ensure that the beneficiaries you have nominated will receive the benefits from your super fund.

To make a binding nomination you must contact your super fund who will send you a form. It is a simple matter. They will file the nomination for use in the event of your untimely death.

Remember to regularly review your nomination. Your circumstances may have changed. Your preferred beneficiaries may also have changed. You should be able to see your nominees on the fund web page.

OUR HELP

We do NOT give financial advice. These are observations and performance changes from year to year. Otherwise, we are here to assist. See below for contact details.

VIP - CONTACTING US
Please note the following changes as we simplify our phone numbers
0428 942 878 dan.dwyer@cwunion.net Dan Dwyer Secretary/Lawyer - for industrial matters & advice
0447 365 433 reception@cwunion.net Administrative eg payments, applications, change of details

Authorised by Dan Dwyer Branch Secretary
CWU Telecommunications & Services Branch, Sydney City, NSW.