If retirement was on your horizon in the next five years or so, the market downturn due to COVID-19 coronavirus might have prompted you to take a closer look at your superannuation and how it’s invested. Perhaps you’ve seen your balance drop and are now wondering what you need to do to get your retirement back on track?

In this article, we explain, generally, what super funds do with retirement savings, the different types of investment options to choose from, stage of life considerations, and the implications of changing investments.  


What super funds do with your money?

Generally, no less than 9.5% of your before-tax salary (if you’re eligible) is paid into super by your employer, which is then taxed at a maximum of 15%. Or if you are self-employed, the amount you’ve paid into your super, if you’ve chosen to invest in one, will be at your discretion. A super fund will then invest this money over the course of a person’s working life, so they can hopefully retire comfortably.

A person can choose from a range of investment options and generally the main difference will be the level of risk they’re willing to accept to have the potential opportunity to generate higher returns. There are never guarantees of higher returns and it’s important to understand the risks and returns before you make a decision about what suits your appetite and circumstances.

Super investment options you can choose from

Most super funds let you choose from a range or mix of investment options and asset classes. These might include 'growth', 'conservative' and 'cash' but the terms can differ across super funds. Here’s a small sample of the typical type of investment options available:

Growth options aim for higher returns over the long term, however losses can also be notable when markets aren’t performing. This option generally invests around 85% in shares or property.

Balanced options try to have a mix of asset investment which may impact the overall return. Generally, during a market downturn, any losses experienced may be lower. This option typically invests around 70% in shares or property, with the rest in fixed interest and cash.

Conservative options generally aim to reduce the risk of market volatility and may generate lower returns. It typically invests approx. 30% in shares and property, with the rest in fixed interest and cash.

Cash options aim to generate stable returns. It typically invests 100% in deposits with Australian deposit-taking institutions, such as banks, building societies and credit unions.

Super funds may have different allocations, so it’s important to read your super fund’s product disclosure statement in full.

If you’re not sure what you’re invested in, contact your super fund. You may also be able to see your current investment option by logging into your super fund’s online portal.

If you’re an AMP customer you can access your banking, super, insurance and investments all in one place through My AMP.

How your stage of life may influence your preference

Choosing the most suitable investment option generally may come down to one’s goals for retirement, their attitude to risk and the time a person has available to invest.

As a person gets closer to retirement, they may prefer a more conservative approach to investing as a share market crash can be harder to recover from.

However, if someone is five years or less from retiring, it’s important to understand the impacts any changes to an investment option may have on a retirement outcome.

Implications of changing investment options

People should think carefully before deciding to change investment options and if possible, speak to a financial adviser or their super fund to understand the implications before making a decisions.

For example, if you’ve seen your super balance go down and are thinking about changing your investment option, say from a balanced fund to a conservative or cash fund, this may see you lock in any losses. It’s similar to selling a house at the bottom of a market slump – most people would think twice and consider allowing the property market time to bounce back before taking that step.

It’s not just locking in your losses to think about. Depending on the type of fund you have, there may be capital gains tax (CGT) or other tax/fee implications when switching investment options.

Getting professional advice at a critical time

As you get closer to accessing your super, you might find speaking to a financial adviser worthwhile.

A financial adviser can bring the right knowledge, expertise and guidance to identify your specific goals, and help you achieve them.

It’s important to remember that the decisions you make about your retirement savings at this stage in your life could potentially mean the difference between a comfortable and not-so-comfortable retirement.

If you need further help in making sure your retirement’s on track, speak to your financial adviser. And if you don’t have one but would like some advice, you can call us on 131 267 or use our find an adviser tool.

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Important information

This information is provided by AMP Life Limited ABN 84 079 300 379 (AMP Life). It is general information only and hasn’t taken your circumstances into account. It’s important to consider your particular circumstances and the relevant Product Disclosure Statement or Terms and Conditions, available by calling 13 30 30, before deciding what’s right for you. Read our Financial Services Guide for information about our services, including the fees and other benefits that AMP companies and their representatives may receive in relation to products and services provided to you.

All information on this website is subject to change without notice. Although the information is from sources considered reliable, AMP does not guarantee that it is accurate or complete. You should not rely upon it and should seek professional advice before making any financial decision. Except where liability under any statute cannot be excluded, AMP does not accept any liability for any resulting loss or damage of the reader or any other person.

The information on this page was current on the date the page was published. As a result of changes to the business from time to time, including changes to product, product issuer, services, trust, trustees and other entities, the information may no longer be current. For up to date information, we refer you to the relevant product disclosure statement and product updates.