Super Clueless For Your Retirement

The first words we heard Tuesday morning were: ‘…starting to think Super is not the solution to…’ Then we hit the snooze button for another 9 minutes of peace and quiet.

The Superannuation industry has copped a lot of flak lately. Unfairly in our opinion. (For any newcomers, Markets and Money always stands up for the downtrodden, the scoundrels and the delinquents. We’re suspicious when it comes to respectable people.) Here’s the article by David Uren that laid out the case against Super back in June:

‘Australia’s superannuation funds have lost a greater share of their members’ funds since the global financial crisis than any other pension system in the advanced world, with the exception of Iceland.

‘Since the end of 2007, Australia’s superannuation funds have been losing an average of 4.5 per cent a year, much worse than the advanced country average of 1.6 per cent.’

Australia’s retirement overlords may have done a miserable job. By our count, a term deposit matched the top performing default Super fund over the last 10 years.

That may seem disappointing, but the Super fund managers just responded to the bizarre global economy created by central bankers.

They boosted the economy whenever it looked like it would keel over. Why not invest in shares in that kind of environment? When it finally did keel over in 2008, the once reliable central banking ‘put’ just stopped working. Australian shares plunged.

Of course, it’s the Australian government that forces the Super industry to look busy. They don’t have a choice but to take our money. At least they get to keep a nice chunk of it for their trouble.

Not deterred by the spectacular failure of this policy, the politicians and policy makers have moved on to fix the problem they created. They now want super funds to invest in bonds. And yes, that is the very asset blowing up entire countries in Europe right now.

Suddenly shifting some massive proportion of retirement savings into bonds certainly could play out in interesting ways for investors and retirees.

What happens to the assets sold as funds make the move? And what will happen to bond prices as the cash flows in? Australia’s bond markets are underdeveloped because of arcane laws, by the way. Another example of a government created problem that it now hopes to solve.

It’s not a surprise that most people are too punch drunk to keep on top of all this. Apart from what the policy makers are up to, mainstream finance reporting is also very odd. See if you can figure out what on earth is going on in this article by Jessica Irvine in the Herald Sun:

‘Super savers could have doubled their money if they had switched to the best performing investments each year of the past decade.

‘Savers who switched their super into cash during the global financial crisis, then spent a year in property and then moved in to fixed interest investments last year, would have seen their $10,000 investment nearly quadruple to $37,000 today, figures show.’

We tried to figure out how on earth you can double your money in ten years at the same time as you quadruple it since the global financial crisis. Quadrupling your money by investing in cash, property and fixed interest investments for a year each is very impressive.

Here’s what the article is trying to say. If:

  1. You were an absolute genius…
  2. …and you managed to know which asset class (stocks, bonds, cash, property) would do best in any given year…
  3. …for 10 years in a row…
  4. …and had the kind of ego that allowed you to bet your entire super on being right…

…you could have done twice as well for yourself as your default Super did.

Whoopdeedoo. Can you think of something better to do with your time than manage your Super if you have those kinds of abilities?

At this point of confusion about Super, there’s only one way of describing the issue. If you want to know how the Super funds have been going about their business, how the government has been busy manipulating and regulating the Super industry and what it invests in, and how your retirement savings were killed off, here’s the detailed explanation.

It feature’s actor Tim Currie telling you ‘who done it’. At the end of that video, everything should be clear as mud.

So the conclusions you should reach are these:

Don’t rely on the government for your retirement

Don’t take comfort from the fact that your retirement plan is taking the same hit as everyone else’s. And don’t think the government will have to do something to help everyone, so you’ll be helped too.

It’s downright dangerous. Events in Greece and Spain should be all the wakeup call you need. Let alone hearing about the issue first thing in the morning when your alarm turns on the radio.

Taking matters into your own hands doesn’t have to be risky, time consuming or difficult. You can make it as involved as you want once you have control.

And, once you take on responsibility, you’ll find yourself thinking and caring. You can also take advantage of opportunities your Super fund can’t.

We’ve got our eye on a company too small to be noticed by the big money. That said…

Enjoy your thrills and spills elsewhere

Don’t turn your Super fund’s performance into a form of entertainment. Turn everyone else’s Super fund performance into entertainment if you have to. You should be pursuing your own strategies, not the ones reported as failing by the media.

There are plenty of ways to make money without relying on rising share prices. And some of them are perfect for funding your retirement. Not that there aren’t speculative opportunities you can take advantage of. Just not with money you’re relying on for retirement.

Dr Alex Cowie braved shootings in South Africa, disease in Morocco, the mountains of Peru, a rickety plane in Botswana and recently the patience of Holden’s security guards down the road in Port Melbourne to bring you opportunities like this. Despite his impressive track record, even Alex doesn’t recommend relying on risky resource stocks for your retirement.

Go where your dollar takes you further

We got an email from an Australian living an extremely comfortable life on the government pension. How? He lives in Thailand. The cost of living difference is big enough that his Australian allowance goes a long way.

If you feel like it’s too late to improve your financial situation for retirement, you’re wrong. It’s the years just before retirement that matter most, because the most is at stake. But even if you do think it’s too late for investment decisions to make a difference, how about lifestyle choices?

The decision to move to a place where your cost of living is cheaper could make your savings go much further. Of course, you should be careful about the decision.

We heard about someone who makes a very decent living in Thailand by flipping certain houses. He waits for any expats who can’t handle the place and buys their house on the cheap.

Then he sells it to the next expat at a much higher price. He reckons about half the people who move there end up leaving again. So it’s a good idea to make an informed decision.

Most Australians are neither informed nor making decisions when it comes to their Super. We’re hoping to change both of those things with our new newsletter. The first issue will reveal how you can turn Jessica Irvine’s hypothetical $10,000 into a $10,000 a year income stream in retirement. Actually, we’ll show you four ways of doing it.


Nick Hubble
for Markets and Money

From the Archives…

Derivatives as a Sponge
5-10-2012 – Greg Canavan

Don’t Teach Your Man to Fish
4-10-2012 – Nick Hubble

Three Phone Calls You Must Make Now
3-10-2012 – Nick Hubble

Beer and Tax in Retirement
2-10-2012 – Nick Hubble

Hard Times for Hard Rocks
1-10-2012 – Dan Denning

Nick Hubble
Having gained degrees in Finance, Economics and Law from the prestigious Bond University, Nick completed an internship at probably the most famous investment bank in the world, where he discovered what the financial world was really like.

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4 Comments on "Super Clueless For Your Retirement"

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For us Gen X/Y out there a lot of us fully believe super will be taken from us and turned into a pension. Don’t think it’s possible. Have gander through the “Curtin” of history to 1941-45. Introduction of income tax and the pension were introduced. Ever wondered where the super went in 1943. HA HA HA HA hic. Super is a tax, will always be a TAX (in fact the high court declared it a tax) and it will never be “your property”. Only the privledged baby boomers retiring now will have access to it. I have history on my… Read more »

Luke , I’m not aware of the tax history of 1943, but i think your core thinking is on the ball. It’s unlikely that super will be anywhere to found in 15years from now. govn’t is already eyeing it off to build fast trains….imagine if they had a real war to justify spending everyones money..and lives to boot.

Pat Russell
The returns by funds need to be considered in relative currency terms. If equity markets rise 10%, but the currency in which they are priced falls 20% relative to the currencies of local trading partners, then you have actually gone backwards. Aussie super funds have struggled due to the overweight exposure of “default” fund options to Australian currency denominated assets. The AUD rose from very low cross rates to what are currently very high relative rates. Australians enjoy a much improved purchasing power with their superannuation savings compared to foreign counterparts, even though the nominal gain (or loss) seems worse.… Read more »
floor sanding perth

“”I’m not aware of the tax history of 1943, but i think your core thinking is on the ball. It’s unlikely that super will be anywhere to found in 15years from now…”” I too think so

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