With Family Law matrimonial settlements currently being negotiated, the value of superannuation entitlements may no longer be appropriate. For the past month, the ASX200 has an index value of 7162 on 20 February, 2020 and 4966 on 20 March 2020 – a 31% decrease. However, the impact on superannuation funds will not be as dire. A typical balanced fund has property and fixed interest holdings. Also, the share portfolio has overseas investments which have exchange rate movements that mitigate the drop in value.
If you are working from a 30 June, 2019 statement some of the current drop is offset by a good run of investment returns up to the start of this year. The graph below is Australian Super’s balanced fund – down about 7% since the start of the financial year.
With many defined benefit funds, investment returns have no impact whatsoever. Benefits are determined by an accrual rate, service and final average salaries. One does get some funds where the employer component is defined benefit and the member component is an accumulation design. These are called "hybrid funds". Family Law values of pensions in the course of payment are also unaltered.
The final group of entitlements are public sector compulsory preserved. Using Military Super as an example, about 70% of the entitlements have CPI in deferment increases. The funded employer and the default member components will be affected. The graph below shows a 10% recent drop but about half that in the financial year to date.
NetActuary will assist with any valuation you feel needs to be looked at. If (after examination) an updated report is needed, our fee will only be $66 inclusive of GST.
Brian Bendzulla
Comments