The average My Super default fund lost about 4.3 per cent in 2022 – the worst return since the Global Financial Crisis.  

That means a $200,000 super account lost $8,000 in one year.  

Director of research at Rainmaker Information Alex Dunnin told ABC Business: “This is broadly the equivalent to all the money contributed into superannuation last year. Long story short, last year's loss pretty much wiped out a year of total contributions.

Bear in mind that super performance is not uniform and depends on the investment approach – growth/balanced/conservative – and the category of investments you’ve chosen. 

For example, using different methodology to Rainmaker Information, analysis from Super Ratings found the median return in balanced funds last year was -4.8 per cent. 

Super Ratings also found only two super funds delivered positive returns in 2022 – of 1.7 per cent and just 0.1 per cent. 

Superannuation funds invest in equity and bond markets, property and other private assets on your behalf. 

Last year, and continuing, central banks aggressively hiked interest rates to combat inflation that was worsened by global factors such as Russia’s invasion of Ukraine, disrupted energy markets, China’s COVID-zero policy, and the resulting supply chain bottlenecks. 

Financial and property markets fell as a result. 

Given the preponderance of share market-based super investments, the performance of shares can significantly affect most superannuation accounts.

The ABC reports that the Australian All Ordinaries index lost 7.2 per cent in 2022, while the benchmark ASX 200 fell by 5.5 per cent after both lifted around 13 per cent in 2021.  

In New York, Wall Street indices fared even worse. 

Bond markets, which are usually stable and underpin super balances, also tumbled. 

Commentators say it’s very rare for bond markets and equity markets to have a terrible year at the same time. 

Good news for most super balances: in recent weeks the ASX 200 has hit highs not seen since before the Reserve Bank started raising interest rates last year.  

Some commentators believe inflation is stabilising and might come down. 

Rainmaker’s Alex Dunnin says: “If [inflation] starts to calm down, then interest rates won’t need to keep going up, or not as aggressively as they were, or they won't need to rise as often as they were last year. 

“That starts to tell people [that] perhaps we’re through the worst of it.” 

Mr Dunnin is optimistic on the basis that although during the global financial crisis super returns dropped 20 per cent – “It was an absolute bloodbath” – within two years performance had recovered. 

“And we went on to have the best decade ever, and superannuation culminating in 2021 being the best year ever for super fund returns.” 

The Chief Investment Officer for industry super fund Hesta, Sonya Sawtell-Rickson, thinks this year and next will be challenging, with slow demand and slow growth. 

The ABC says most economists expect Australia to avoid a recession, but Ms Sawtell-Rickson says it will probably still feel like one as interest rates bite.  

"Higher interest rates mean businesses that are borrowing might struggle to make investment cases stack up, it means households now have higher cost of debt and higher mortgage repayments, which is going to impact their consumer discretionary income and their ability to spend,” she says. 

Commentators are reluctant to predict if there will be a super bounce back this year, describing predicting in the short term as a “mug’s game”. 

Investors need to take a longer time frame – three to five years – and not necessarily react to immediate market performances.  

Returns over that longer period are not expected to repeat the strong double-digit returns we've become a bit used to over the past decade. 

Director of Super Consumers Australia Xavier O'Halloran warns fund members not to ditch their fund based on one year of bad returns alone. 

“People are understandably concerned about what's going on; there’s been a lot of uncertainty in the market,” he says. 

“But with superannuation, for most people, it is a long-term game and, and focusing on what's happening from year to year can be a really problematic way to view your super, you can end up losing a lot of money if you're chopping and changing constantly with the markets." 

Instead, he suggests consumers focus on the basics such as consolidating accounts to avoid paying excess fees or insurance they don’t need and looking for a low-fee account. 

"At the moment, their annual fee on a My Super product for someone that’s got about a $50,000 balance, on average is about 1 per cent," he says. 

“So you're looking at funds with fees that are less than that. And then you’re on the right kind of track to making sure the basics of your super are set up regardless of what’s going on in the market.” 

Using the Australian Taxation Office’s YourSuper Comparison Tool to compare funds is a good start.

Meanwhile, the Australian Financial Review reports super savers may be able to top up their super pension accounts with after-tax (non-concessional) contributions by $200,000 from July 1 with the indexed increase in the transfer balance cap (TBC) from $1.7 million to $1.9 million. 

That’s because the maximum thresholds allowed for making after-tax contributions are also expected to rise. 

The TBC is the maximum amount a person can use to start a retirement income stream, often called an account-based pension. 

The AFR cautions: “Despite this week’s inflation-linked adjustment to the TBC, financial advisers are wary about whether the Albanese government will honour the increase. They say Labor could freeze the cap at $1.7 million in May’s federal budget to crack down on tax concessions for very large super accounts.” 

If the increase in the TBC to $1.9 million does proceed, there are also opportunities – and increased complexities – for wealthy savers coming up to retirement, those using the popular transition-to-retirement schemes and couples wanting to equalise super savings through contribution strategies. 

Peter Crump, a senior consultant with consultancy BDO, says: “This increase is great. But the system is complex and super savers need to understand the complexities before devising a strategy.” 

For further reading: ABC News, Australian Financial Review, MoneySmart