Q: Why is my super losing money? I thought it was safe from sharemarket falls.
From time to time your super balance can fluctuate when there is a sudden rise or fall in the sharemarket. Negative events such as what we are currently experiencing with the impact of the coronavirus can have a significant impact on the value of your super or pension balance in the short term.
Most Club Plus Super members are invested in the ‘MySuper’ investment option which has roughly 50% of its investments allocated to sharemarkets in Australia and around the world. Importantly that investment option also has the remaining 50% invested in other asset classes such property, infrastructure, fixed income and cash which tend to perform differently to sharemarkets.
We have a range of investment options to choose from which have different risk profiles which can be based on your ‘investment time horizon’. Put simply, your investment option should reflect the stage of life you’re at and the level of risk you are comfortable taking.
It is important at times like this to remember that for most people super is a long-term investment and it is worth considering how many years it will be before you actually need to access the money. If you won’t be spending the money for many years, it is important not to react hastily and risk undermining your long-term goals. If you are about to retire or in retirement and you are worried about the value of your super or pension we encourage you to speak with us or seek professional advice before making an investment decision.
Q: How is my super invested?
Club Plus Super has a range of investment options available.
For example, the MySuper/Balanced investment option is designed for members with a medium to long-term investment horizon of five years or more. The MySuper/Balanced investment option is designed for those seeking a steady rate of returns who can tolerate potential moderate to high levels of short-term volatility.
The Conservative Balanced investment option, on the other hand, is designed for members with a short to medium-investment horizon of three years plus (for example, pre-retirees or pensioners.). The Conservative Balanced investment option is designed for those who may want low to medium levels of consistent return with less exposure to short-term volatility.
You can read more about our investment options on the Club Plus Super website under Investment Options here.
Q: Can I change my investment option?
Yes, but it’s important to remember that changing investment options could affect your future investment returns. Switching to a more conservative investment strategy after a major fall could leave you worse off over the long-run, because it risks missing the full benefits of any recovery.
For example, during the GFC, the share market fell around 40% in 2008-9. During the following 12 months the market recovered and went on to exceed the pre-GFC levels of returns. Investors who stayed invested in cash missed out on the opportunity to benefit from the share market recovery.
Q: What are you doing to stop my super losing money?
We leverage the expertise of more than 25 experienced and highly credentialed investment managers who strategically invest in different asset classes on your behalf. Our team is constantly looking to manage risk and position for opportunity.
While no one knows how long the current circumstances will last, our investment managers are working hard now to not only protect your investments from declines in the markets but also investing your money to take advantage if conditions change and share markets recover, so as to maximise your investment returns over the long run.
Q: When is a good time to change my investments or sell my shares?
There is a common saying that good long-term investing is about ‘time in the market’ and not ‘timing’ the market.
While no-one knows with certainty when the exact right time to buy or sell shares is, after shares experience a short-term fall, they are cheaper to buy and may represent good long-term value. We also know that over the long term sharemarkets have tended to perform stronger than other asset classes.
Q: But I’ve lost money – what should I do?
Unless you are planning on retiring or in retirement, your superannuation is not money you will spend tomorrow, but rather income that you will draw on later in your life. For that reason it is important to remember what you are saving towards and whether that goal has changed given the recent events or not.
While your super balance may look lower now, switching out of shares or to a more conservative investment strategy after a major fall can effectively ‘lock the loss in’.
One way to think of this is to compare the same strategy to home ownership. If you own your own home, the value of it will fluctuate over time. Even if at some point your house is worth less than you bought it for, you haven’t actually ‘lost’ any money unless you sell the house at that point.
Q: I’m a retiree / about to retire – what should I do?
If you are a pre-retiree or pensioner you should consider talking to a financial adviser to find out what’s right for your personal situation. You can request a call back from a Club Plus Financial Planning adviser here.
Q: I want to change my investment profile to cash
Now that the market has fallen, a move to cash effectively ‘locks in’ the loss.
If you are a pre-retiree or pensioner you should consider talking to a financial adviser to find out what’s right for your personal situation.
Can you afford to stay invested in cash earning little or no interest until you retire or while you’re on a pension? If not, how will you know when to move from cash to an investment option? It is impossible to time the market with certainty.
Interest rates are at very low levels at the moment with the RBA cash rate at only 0.5%. Therefore your earnings on cash will be minimal and are unlikely to keep up with inflation.
Q: I’m afraid I’ll lose the money invested in the share market
Diversifying your investments, as our MySuper/Balanced investment option does, offers some protection from falls in one sector. It’s unlikely that shares and property and fixed interest and infrastructure assets would all be plummeting in value at the same time.
Even if you think about shares alone it is worth remembering that for your shares to be worthless companies like the big banks, the big miners, and the big tech companies would have to become worthless.
It is encouraging to see that the Government and the Central Bank are taking measures to support the economy in response to the current crisis. As at 17 March 2020 the Reserve Bank of Australia (RBA) reduced interest rates and the Federal Government announced that it would inject a $17.5b stimulus package to support the economy. We have confidence that in time the share market will eventually recover.
In past crises, those people patient enough to ride out market volatility have been rewarded in the long term.
Income Protection is a replacement of income if a claimant is off work due to injury or illness. You must satisfy ‘at work’ requirements to be eligible to claim – you must be at work to claim, if you are not working you are ineligible to claim.
Unfortunately, if your employer has closed down or your employment has ceased for any other reason you are not covered for income protection insurance.
If you are in this position and need financial assistance check your eligibility for possible government support here.
As a last resort, given its impact on your long-term retirement income, you may be eligible for an early release of a limited amount of your super savings due to extreme financial hardship or compassionate grounds.
To meet the financial hardship criteria you will need to have been receiving eligible government income support payments continuously for 26 weeks and be unable to meet reasonable and immediate family living expenses.
Compassionate grounds criteria include things like medical costs for you or a dependant or making a payment on a loan to prevent you from losing your house.
You’ll find more information here.
Q: Are club plus super members with income protection cover eligible to claim if they contract Coronavirus?
You will be covered for coronavirus as long as:
- you contracted the virus after your insurance started, and
- your insurance is in force, and
- you meet the at work definitions
- you satisfy the other terms and conditions of your policy (including your duty of disclosure).
Note: a waiting period will apply from the date a claim is admitted to the first payment period. Please check your account for your relevant waiting period.
Yes. Our insurance policies provide worldwide insurance cover 24 hours a day.
Q: What is the claims process?
For more information on the claims process, please refer to the insurance claims factsheet or give us a call on 1800 680 627 to discuss.
Investments can go up and down. Past performance is not necessarily indicative of future performance.
We are not licenced to provide general financial product advice except as it relates to our products. Any financial product advice that is provided does not take into account your personal objectives, financial situation or needs.
Club Plus Financial Planning Pty Ltd (Club Plus Financial Planning), ABN 14 143 636 766 acts as a Corporate Authorised Representative #367058 of Link Advice Pty Ltd, ABN 36 105 811 836 (“Licensee”). The Licensee holds a current Australian Financial Services Licence #258145 and is responsible for the financial services provided to you.