Australians face the prospect of negative returns on their superannuation statements dated 30 June 2002, for the first time since the introduction of compulsory retirement savings.
Australians face the prospect of negative returns on their superannuation statements dated 30 June 2002, for the first time since the introduction of compulsory retirement savings.
According to Allan Griffiths, Managing Director Norwich Union Life Australia Limited: “This is likely to come as a shock to the many Australians who have not been sufficiently educated in superannuation and investment matters despite the introduction of national compulsory superannuation more than a decade ago.”
While eighty-eight per cent of Australian workers are covered by superannuation1, there is a low level of detailed understanding of investment markets in the general population – many Australians may not even know where their superannuation is invested”, he said.
With the possibility of negative superannuation returns, independent financial advisers and fund trustees will have to be prepared to put negative returns into perspective for their clients and members respectively.
Negative returns are largely a result of exposure to international equities. In the 2002 financial year so far, there has been a large negative contribution from international shares (-14.9%). Even where those shares have been hedged back into Australian dollars, eliminating the currency effect, the result so far is still -11.4%.2
Total superannuation assets fell by 4.2 per cent to $501.6 billion at the end of 20013, largely due to changes in asset valuation in the wake of September 11.
“Market fluctuations are a normal part of the investment cycle. What makes negative returns more difficult for investors to understand is that the solid investment performance throughout the 1990s – with an average return of 12 per cent - has created high expectations for a new generation of investors.
“There is also a danger that - in the wake of negative superannuation returns – fund members may rush to switch to more conservative investment options such as cash without making an informed decision.
“It is important that people seek independent financial advice if they are considering switching superannuation investment options. The message to fund members should be 'don’t panic' - superannuation is a long term investment and your choice in investment options is one which needs to reflect your individual financial circumstances,” Mr Griffiths said.
1APRA Industry Overview, 1st Quarter 2002.
2Intech: Investor choice performance survey – period ended 30 April 2002
3APRA Industry Overview 1st Quarter 2002, p 12
Allan Griffiths is available for interview.
For further information please contact:
Simon Morgan
Group General Manager – Public Affairs
Norwich Union Australia
Tel 03 9829 8892
Mob: 0407 966 632
E-mail: simon_morgan@norwich-union.com.au
Notes to editors:
- Norwich Union Australia is a group of three specialist financial services companies; Navigator, Norwich Union Life and Portfolio Partners. Through these companies we provide products and services in the areas of wealth creation, wealth management and wealth protection for more than 300,000 customers throughout Australia.
- Globally, Norwich Union Australia is part of Aviva plc, the world’s seventh largest insurance group, the largest insurer in the UK and one of the top five life companies in Europe. Aviva was formed in May 2000 through the global merger of CGU plc and Norwich Union plc.
- Aviva’s principal business activities are long-term savings, funds management and general insurance. It has a market capitalisation of approximately A$40 billion at 03/05/02, worldwide premium and investment sales of more than A$74.8 billion from ongoing business and more than A$556 billion in assets under management. The group has 64,000 employees and more than 25 million customers.
- Norwich Union Australia has a sister company, CGU Insurance Ltd, a top 5 general insurance business, which operates independently in Australia.
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