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Surge in super switching, new data finds

By Adrian Flores
06 May 2020 — 2 minute read

Switches in investment from members of super funds were happening at three times the normal rate in March in the midst of the impact of COVID-19 on markets, reveals new data.

Most members switching to cash, followed by shares

Thirty-nine per cent of members who switched their super had switched to cash, with the second most popular investment category being Australian shares (26 per cent), according to data from Colonial First State (CFS).

The CFS data also revealed that pre-retirees (members aged 50 to 64) were the most likely to switch to cash (47 per cent of all switches to cash), followed by wealth accumulators (members aged 40 to 49) with 19 per cent of all switches to cash.

Retirees (members aged 65 and over) were least likely to switch to growth assets (9 per cent of all switches to growth assets). 

Younger members (aged 49 or under) were more likely to switch to growth assets than cash (45 per cent of all switches to growth assets, with this group comprising only 34 per cent of those switching to cash).

Switches to growth had lower amounts

Meanwhile, switches to growth had a lower average amount switched than switches to cash, with the average switch to growth $19,000 compared to the average switch to cash of $99,000.

CFS suggested that switching to growth was more of a partial reallocation of members’ portfolios.

“We recognise the importance of being focused on investing for the long term, and we’ve been talking to our members directly about this to help them navigate what is understandably a concerning set of circumstances,” said CFS general manager for investments Scott Tully.

“We saw some people switching to cash, which means those members missed out on upside as markets rebounded. But we’re encouraged that many of our members also stayed the course and remained focused on the long term.

“Fear of volatile markets can drive decisions that might not be in a member’s long-term interests. The switching activity we have seen is directly linked to how the Australian market is performing on the day. However, selling after markets have fallen means that you lock in those losses and longer-term investment outcomes may be more difficult to achieve.

“Reacting to short-term market movements, regardless of whether you’re switching to defensive or growth assets, can have an impact on the long-term performance of your super. It’s crucial for members not to lose sight of their long-term goals and personal investment objectives and seek quality financial advice about managing market volatility before making a change.”

However, CFS also noted in its data that the number of members who switched to growth assets (including Australian shares) was almost exactly the same as the number that switched to cash.

“Our data showed that while we had many super members who were spooked by the volatility, there were just as many people looking to invest after the market had fallen,” Mr Tully said.

“This suggests there are members who understand that super is a long-term investment but are prepared to take advantage of lower prices in the middle of a crisis.”

Surge in super switching, new data finds
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Adrian Flores

Adrian Flores

Adrian Flores is the deputy editor of SMSF Adviser. Before that, he was the features editor for ifa (Independent Financial Adviser), InvestorDaily, Risk Adviser, Fintech Business and Adviser Innovation.

You can email Adrian at [email protected].

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