Education videos

Welcome and thank you for taking the time to join our Super basics – saving for your future presentation.

If you consider that your super maybe come one of the largest assets you'll ever have, paying closer attention to it sooner rather than later could make a real difference down the track. If you've ever had questions about super, we're going to break it down into simple terms so you can feel confident you're across what you need to know.

My name is Jaclyn Livingstone. I'm an Education Manager at AustralianSuper, and part of my job is to help you better understand how super works.

This presentation may include general financial advice, which doesn't take into account your personal objectives, financial situation or needs. Before making a decision, consider if the information is right for you and read the relevant Product Disclosure Statement and Target Market Determination on the AustralianSuper website.

Today, we'll be covering a number of things such as: what is super, when you can access it, how super works, ways to take control of your super, and where to go for help and advice.

Super is money set aside and invested while you’re working, to live off when you retire. If you're eligible, your employer will pay a percentage of your before-tax income into your nominated super account under what's known as the Superannuation Guarantee, or SG for short.

The SG rate is a percentage of your before-tax income. It's scheduled to gradually increase and reach 12% by the 1st of July 2025. If you're employed and over 18, you're generally eligible for SG contributions regardless of whether you're a full time, part time or casual employee, including if you're a temporary resident. If you are under 18, you must work more than 30 hours per week to be entitled to SG contributions.

Separate to SG contributions, you may choose to contribute to super yourself if you're self-employed or want to add to what your employer already puts in.

When you’re putting away money for your future, it’s natural to want to know when you can access it. Generally, you can access your super when you reach your preservation age, which will be between 55 and 60, depending on when you were born, and retire. Check out the table to see what your preservation age is.

If you've reached your preservation age but aren't ready to retire permanently, you may be able to access a portion of your super through something known as a transition to retirement income account. You can access all of your super when you turn 65 too, even if you haven't left the workforce.

There are also certain situations where you may be able to access some or all of your super early. This is strictly limited to special circumstances. Eligible first home buyers may withdraw a certain amount in voluntary super contributions to put toward a deposit under the First Home Super Saver Scheme.

Other instances include when you may be experiencing severe financial hardship, or under compassionate grounds, where you don't have capacity to meet certain expenses. This may include medical expenses, funeral costs, or mortgage repayments if you're at risk of losing your home. If you are diagnosed with a terminal illness or are permanently incapacitated, you may also be able to claim some or all of your super.

Likewise, if you're a temporary resident who earns super who earns super while working and living in Australia, you may apply to have super paid out as a Departing Australia Superannuation Payment, after you leave. For more information regarding rules and eligibility, visit australiansuper.com/AccessSuper

We've looked at what super is and when you can access it. Let's now unpack how it works and some other things you'll want to be across.

Your super is a bit like a bank account in that it’s a way to put money away for your future. Money goes in through employer contributions, if you're eligible. It also goes in through any extra contributions you might decide to add, in addition to investment returns, your super fund may generate for you.

Some money also comes out to cover fees, premiums for any insurance you might have, and tax, and it may drop due to market volatility. It may sound a little complicated, but let's break it down so it makes a bit more sense.

Contributing into super may be a tax-effective way to save for your future, as people typically pay less on super than they do on any employment income they receive.

There are two types of contributions you can make, which include before-tax contributions, also known as concessional contributions. And there are after-tax contributions, also known as non-concessional contributions.

Let's take a look at these in a bit more detail. Before-tax contributions include what employers are required to make under the Superannuation Guarantee. These are probably the most well known.

Salary sacrifice contributions are additional contributions you can get your employer to make directly into your super fund out of your before-tax income, if you choose to. Then there are tax-deductible contributions. These are voluntary contributions you can make, such as when you transfer funds from your bank account into your super, that you can then claim a tax deduction for, when you do your tax return. The maximum amount you can contribute in before-tax contributions is currently $27,500 per year.

Separate to that, there are after-tax contributions, which generally include voluntary contributions you make after tax. The limit on these is $110,000 per year. In certain circumstances, you may be able to contribute more than the annual limits, under what's known as the carry forward rule and the bring forward rule. For more information on these rules, visit our website, or you can register for one of our webinars on contributions.

We've spoken about contributions as a way to increase your super. Now let's look at the investment returns your super fund may generate for you. Super funds typically invest in a range of assets with the goal of growing member balances over time. Compound interest plays a big role in this.

Put simply, compound interest is the investment returns generated on both the money you've saved and the interest you earn. Here's an example of what $20 a week could do to your super balance over the period of a decade when compound interest is involved. As you can see, adding to your super in your twenties could make a big difference to your final super balance later on. The earlier you get the ball rolling, the longer your money will have to accumulate compound returns and grow.

Before adding to your super, weigh up your financial circumstances, contribution caps that may apply, and any potential tax issues.  

We've looked at how super works and what factors may help your super balance to grow. Now let's take a look at how AustralianSuper invests members’ money. The money put into your super is invested by your super fund with the aim of generating returns to help your retirement savings grow over time.

As a part of this, choosing the right investment option for you is important as it could affect how much your super savings grow and how long they might last. The investment option you choose will come down to a few things, such as how hands on you want to be, how long you plan to invest for, and how comfortable you are with investment risk.

For instance, some people may choose to take on more risk with the potential for higher returns in their younger years, but then change to more conservative options with lower returns as they get older and closer to retirement. A good place to start in making the right decision for you is to read the AustralianSuper Investment Guide, which is available ataustraliansuper.com/InvestmentGuide

This guide lists your investment options with AustralianSuper in more detail. Alternatively, you can speak toa phone based financial adviser who can look at your situation and provide advice on the most appropriate investment option for you.

When you join AustralianSuper, unless you choose otherwise, your money is invested in the Balanced option, which is our default investment option. The Balanced option invests in a wide range of assets, including shares, private equity, infrastructure, property, fixed interest, credit and cash.

If you are in the default option, you can see here what we invest in each asset class and what ranges we stick to, keeping in mind asset allocation may change from time to time depending on market conditions. It's also important to know if you do want to take a more hands on approach, other investment options are available, which you can check out on our website.

We spoke before about market volatility and how this can impact your super balance. We also spoke about the power of compound interest, and this graph reflects that while markets may go up and down, they typically recover over the long term. A look back over history can be reassuring. It shows that significant share market downturns and recessions aren't uncommon. You can see here that over the last 20 years, the performance of the Balanced option, which is our default investment option, has weathered the storms of the Global Financial Crisis and the COVID 19 downturn to provide strong long-term returns.

In this example, a balance of $100,000 increased to more than $450,000 over two decades, despite market ups and downs, reiterating that super is a long-term investment.

Moving onto fees, super funds generally deduct these from member account balances. We'll unpack how this is done, but a quick pointer is that you shouldn't be charged exit fees for moving all or part of your super to a different fund as these fees were banned in 2019.

There are different types of fees at AustralianSuper. The investment fee helps cover the transaction costs of managing your investments. It’s charged as a percentage of your balance and can vary depending on your choice of investment option. Transaction costs are incurred when buying and selling underlying investments for certain investment options.

The administration fee covers the general costs of managing your account. It covers things like the Contact Centre and maintenance of the mobile app. It's charged as a combination of a fixed fee and a percentage of your account balance up to a certain limit. Additional fees and costs for things like insurance, if you have it, may apply. For a full run down, check out australiansuper.com/fees

Having multiple super accounts, which around a quarter of Australians do, might mean that you're paying more fees than you have to. This could mean less money for you when you reach retirement. For this reason, you may want to consider whether consolidating accounts into one is appropriate for you.

It could create advantages, such as fewer sets of fees and less paperwork. However, it's important to do your research first and make sure you're not at risk of losing any features and benefits, like insurance, which may be attached to the account you're considering closing. You'll also want to make sure you have adequate features and benefits in the account you're thinking about consolidating into.

Paying for insurance out of your super has come up a few times in this presentation. Some people may not realise this, but one of the benefits of having insurance cover inside super is it may be cheaper. At AustralianSuper, we use our size and scale to negotiate lower insurance costs. It is important, however, to look into whether you have the right type and the right amount of cover if it's something you have currently, or are considering getting in the future.

There are three common types of insurance cover included in super. The first is death cover, which can help ease financial stress by paying a lump sum to your beneficiaries if you pass away. The second is Total and Permanent Disablement cover, or TPD for short, which can provide a lump sum payment if you are totally and permanently disabled and can no longer work. The third is Income Protection, which can help if you became ill or injured, at or outside of work, and can't temporarily work.

It can provide monthly payments to help you get by while you're not earning your regular salary. AustralianSuper provides most members with a basic level of insurance cover with their super account, noting some age and eligibility conditions apply. You can access more details on insurance, including when cover starts, by visiting our Insurance through your super page at australiansuper.com/insurance

You can also get an estimate of your insurance needs by using the insurance calculator on our website. This is a great way to estimate how much cover you should potentially have, and how much your cover might cost.

Whether insurance is something you want or not, another important consideration is who your super will go to in the event you pass away. This is important because if you don't nominate a beneficiary, your super fund may decide who receives your super money. This is regardless of what you have done in your will, if you do have one. You’ll have the option to make a binding or a non-binding nomination.

Binding nominations typically expire after three years unless you renew them, while non-binding nominations mean your super fund will consider who you've put down, but ultimately have the final say. If you don't nominate anyone, your super fund will pay your death benefit to your estate or use its discretion to determine which eligible beneficiaries the money should go to.

Eligible super beneficiaries can include: your current spouse or partner - whether you’re in a same-sex or defacto relationship; your child, of any age; someone who's in an interdependent relationship with you; anyone financially dependent on you when you pass away; your estate or legal personal representative. There may be tax implications depending on who you nominate. To find out more visit  australiansuper.com/beneficiaries

We also run a regular webinar on Estate planning and your super, which you can register for via our website.

We’ve covered a number of things today to help you understand the basics of super.  We’ve looked at what super is, when you can access it, and how it works. It's also important you take action, because our actions, coupled with yours, may be able to improve the life you live in retirement.

Some things you might consider include: contributing a bit more to your super, if you’re in a position to; checking your investment options; reviewing any insurance cover you might have; and nominating your beneficiaries.

You could also get a sense of how your super is tracking by using our super projection calculator. To work out how much super you could have at retirement and how long it could last, visit australiansuper.com/ProjectionCalculator

If you're looking for help and advice, you can visit our website, which has a range of tools and calculators. Qualified financial advisers can also provide members with advice on simple matters at no additional cost, over the phone. This might include advice on making an investment choice, contributing to super, and the insurance options available in your AustralianSuper account. A small fee does apply to advice regarding retirement more broadly, and transition to retirement strategies. For members who may have more complex things to discuss or would prefer to meet with an adviser in person, AustralianSuper also offers access to financial planners in AustralianSuper offices around the country, which does involve a cost.

If you're interested in learning more about super, we offer a range of webinars at different times throughout the year, so you can tune in from the comfort of your own home, or wherever you have internet access. To find out more or to check out other videos, visit australiansuper.com/webinars

Thank you for taking the time to join our Super basics - saving for your future presentation. We wish you all the best on your financial journey.

Welcome and thank you for taking the time to join AustralianSuper’s Planning for retirement sooner rather than later presentation.

If you've thought about retirement, you might have pictured yourself traveling, taking up new hobbies, or spending more time with loved ones. Your financial situation may have also crossed your mind. Can you really afford to retire when you want to? How much will you need? Will you be in a financial position to do the things you want to do? What could you do now to retire with more confidence later?

My name is Kim Heironymus and I am an Education Manager at AustralianSuper. I’m here with Phil Wilkins who is a Financial Planner and authorised representative of Industry Fund Services. Together we’re going to address some of the commonly asked questions that we get from members in the lead up to retirement.

This presentation may include general financial advice, which doesn't take into account your personal objectives, financial situation or needs. Before making a decision, consider if the information is right for you and read the relevant Product Disclosure Statement and Target Market Determination on the AustralianSuper website.

Today some of the things Phil and I will be discussing include where your money may come from, how much you might need, different contribution strategies, other important considerations, and where to go for help and advice.

Phil in the conversations you have with members every day, what advice do you often give them when it comes to retirement?

Thinking about it before it happens is a great first step. You'll want to consider what retirement looks like for you. It might involve holidays, activities with friends and family, volunteering, or maybe even a bit of work on the side. You'll also want a rough idea of what your expenses might be. For instance, do you own or rent your home? What might that cost you in the future? Could downsizing, relocating or renovating be on the cards?

From a lot of the conversations I have, I find people’s living expenses, outside of travel, moving and hobbies, don't tend to change too much in retirement, which is why figuring out what you're spending now could go a long way. If you know when you want to retire and about how much you want to live on, it’s then easier to get an idea of how long your money might last and if what you want to do is actually achievable.

Another key consideration is where your money will come from. Most retirees will receive income from at least a couple of different sources. Aside from what you might have saved in super, this may include the Government Age Pension, if you’re eligible, additional savings, including what you might inherit, and other investments, you potentially have access to.

Phil, if you're planning for retirement and putting money into super at the same time, an obvious question is, when can you access it?

So, Kim, generally you can access your super when you reach your preservation age. This will be between 55 and 60, depending on when you were born, and you meet a condition of release, such as retirement. You can check out the table here to see what your preservation age is. If you've reached your preservation age, but aren't ready to retire permanently, you might also be able to access a portion of your super through something known as a transition to retirement pension, which we at AustralianSuper call a transition to retirement income account. We'll cover that a bit later in the presentation.

You can access all of your super when you turn 65 too, even if you haven't left the workforce. There are some certain circumstances as well, where you may be able to access some or all of your super early. For more information, check out: australiansuper.com/AccessSuper

Regardless of whether you have money in your super or not, you might be eligible for the Government Age Pension as well. It's important to know that the age you can access your super and the age you’ll be eligible for the Age Pension won't necessarily be the same. As you can see from the table, the age you qualify for the Age Pension will be between 65 and 67, depending on your date of birth. Apart from your age, eligibility will come down to your residency, as well as your income and assets.

As mentioned earlier, if you're eligible for the Age Pension, it could provide a second source of income on top of what you’ve saved in super. While everyone's retirement dreams are going to be a little different, The Association of Superannuation Funds of Australia, or ASFA for short, estimates what a single person or couple may require each year to live a comfortable versus a modest lifestyle. This could help to give you a better picture of what you might need.

The comfortable retirement standard allows retirees to maintain a good standard of living in the years after they finish working. It accounts for daily essentials and home repairs, as well as private health insurance, a range of exercise and leisure activities, and the occasional restaurant meal. The estimate also accounts for an annual domestic trip and less frequent international trips.

Let's compare this now to what you might need each year to live a modest lifestyle. A modest retirement lifestyle is considered better than living off the Age Pension alone. It allows retirees to afford basic health insurance, and infrequent exercise, leisure and social activities. You'll notice from the image that there are a number of items that were included in the comfortable retirement lifestyle that are missing from the modest retirement lifestyle. Remember, this is a guide only, and not an actual representation of what you can or can’t achieve in retirement.

It's also worth looking at how the comfortable and modest lifestyle budgets compare to full Government Age Pension rates. You can see from the table that the money needed to fund a modest lifestyle, according to ASFA, is a bit higher than the full Age Pension rates currently available. If you're relying solely on the full Age Pension, it’s important that you’re aware of this gap. And this is where your super, even if you don’t have a lot of it, could make a big difference to your lifestyle in retirement. The Age Pension, if you're eligible, may be able to top up what you've saved in super, which could make a big difference.

To get a better picture of how your super and the Age Pension could work together, Phil, let's run through a case study with a couple who are starting to think about retirement. Jamie and Daniella are both 53 years old. Jamie earns $85,000 per year, and has $180,000 in super, while Daniella earns $75,000 per year and has $120,000 in super. Their current living costs are about $65,000 per year, and they'd like to have the same level of income in retirement, which is something that they’d like to do at age 63. And in the meantime, the only contributions being made into their super are the compulsory contributions that are paid by their employers.

Kim, you can see here Jamie and Daniella’s current retirement outcome, if they were to retire at age 63. The combination of their super accounts, in light and dark orange, provide them with their desired $65,000 per year until they’re eligible for the Age Pension at age 67. From that age, it's a combination of their super and Age Pension, in light and dark blue, that maintains their desired annual income until age 83, which is when their super runs out. From age 84, their income drops to the full Age Pension amount.

So, the question becomes, how can Jamie and Daniella achieve the income they want until life expectancy, and potentially beyond? In short, they’re going to need a higher super balance at retirement. A good place to start is drawing up a budget to see if there’s room for Jamie and Daniella to make additional contributions into their super on top of what their employers already pay.

Let's take a look at the types of contributions available, and then we can see which might work for Jamie and Daniella, if they’re in a position to put in more.

Concessional contributions include those that are paid by your employer. They also include salary sacrifice contributions, which are additional contributions people may get their employers to make into their super fund, out of their before-tax income, if they choose to.

Then there are tax-deductible contributions, which are voluntary contributions people can make, which they can then claim a tax deduction for at tax time. For those aged 67 to 74, you need to meet a work test, in order to make tax-deductible contributions. This requires a person to be employed for at least 40 hours over a 30 day consecutive period during the financial year, unless you qualify for an exemption.

There's also a limit on the amount of concessional contributions a person can make and this is currently $27,500 per year. Regarding the annual cap that applies to all concessional contributions, there may be certain circumstances where you can contribute over this limit. For instance, it is possible to catch up on concessional contributions under what’s known more formally as the carry forward rule. This enables you to accrue unused concessional cap amounts for up to five years, which could help if you've taken time off work to study or care for children. You might have also been focusing on other financial commitments, like paying off a mortgage.

Let's look at this example with Gary. He's recently gone back to work full time and wants to catch up on what he hasn't contributed over the last couple of years due to a reduction in work. He’s made $21,000 in concessional contributions this year, including $11,000 from his employer, as well as a tax-deductible contribution of $10,000. This leaves $6,500 remaining on his cap, which means he could carry this forward and contribute $34,000 in concessional contributions next financial year. If Gary also carried forward unused cap amounts over the following four years, he’d be able to contribute any additional unused amounts on top of that as well.

If you want to know more about eligibility and whether this strategy might be right for you, you should consider getting financial advice.

Separate to concessional contributions, there are also non-concessional contributions. These generally include voluntary contributions that you make after-tax, which you don't claim a tax deduction for. They also include spouse contributions, which you might make if you want to top up a partner's retirement savings. The limit on non-concessional contributions is $110,000 per year. Again, you might be able to contribute more than this under what’s known as the bring forward rule.

Different to the carry forward rule, the bring forward rule allows you to put in three times future annual cap amounts. This means you may be able to top up your super by up to $330,000 within the same financial year.

This could help if you’ve reached your concessional contributions cap, received an inheritance, or made money on the sale of a large asset. Individuals up to age 75 can take advantage of the bring forward rule, but your total super balance as at 30 June of the previous financial year will play a part.

Thanks Phil. That covers some of the different contribution types available. Now, let’s go back to Jamie and Daniella and what they might do in their situation.

For Jamie and Daniella, they’ve completed a budget and determined they do have some spare cash available at the end of their pay cheque each fortnight, which they could contribute. It's recommended they both make additional contributions into their super accounts because the tax rate on concessional contributions, generally 15%, unless you earn over $250,000 a year, is less than the tax they both pay on their employment income.

They do this by setting up a salary sacrifice arrangement with their employer. Jamie salary sacrifices $7,800 each year, so $150 a week, until age 63, and Daniella salary sacrifices $5,200 each year, so $100 per week, also until age 63. Entering those additional contributions, you can see with salary sacrifice contributions, that Jamie and Daniella now have their desired income of $65,000 per year until age 88.

In this scenario, the advice received has resulted in an additional $127,783 in super, which gives Jamie and Daniella an extra six years of the retirement income they want. They also take their desired income beyond their average life expectancy, which means they could retire a little earlier or even spend a little bit more in retirement.

If you want to work out how much super you could have at retirement, how long you super might last, and what difference additional contributions could make to your balance, check out the super projection calculator on our website.

Something else we’re going to look at today is a transition to retirement strategy. Now, this involves transferring some of your super into a transition to retirement income account once you've reached your preservation age. You can then withdraw a portion of your super from this account, whether you’re still working full-time, part-time or casually.

It may create greater flexibility and potential tax benefits when combined with certain types of contributions. Minimum and maximum withdrawal amounts do apply. The minimum is dependent on your age, while the maximum is 10% of your TTR account balance on 1 July in most instances. This strategy won’t be for everyone though, so it is important to seek advice before deciding what's right for you. Phil, could you take us through some of the potential benefits and how TTRs work?

Kim, TTR strategies were initially designed for those who wanted to work less and top up their take-home pay.

However, these days, a lot more people are using this strategy so they can continue working the same hours, while contributing more into super, and reducing what they pay in tax.

This may be possible through making concessional contributions on top of what your employer pays, as your tax on super is generally less than what most people pay on the income they receive from working. If you’re wondering how it works, you need to make a transfer of at least $25,000 from your super to open up a TTR account.

To keep your super account open, you also need to leave at least $6,000 in it. You can then withdraw regular payments from your TTR account to supplement any reduction in your take-home pay due to the additional contributions you’re making.

To get a clearer idea of where the tax benefits may lie in this type of strategy, let's take a look at Fred. Fred just turned 60 and is keen to add to his super balance, which is currently $175,000. He earns $60,000 per year and he wants to retire at 65.

Through implementing a TTR strategy, Fred found that he could salary sacrifice $18,100 into his super over five years without reducing his take-home pay. Apart from increasing his super balance by over $18,000, Fred manages to save $14,000 in tax over five years through salary sacrifice. He's also able to retain the same take-home pay that he would have had without his TTR income account.

Phil, what happens to a TTR income account when someone stops working?

Once someone reaches age 65 or advises that they're retiring permanently, their TTR income account automatically converts to what’s known as an account based pension. At AustralianSuper, we call it a Choice Income account. You can transfer the rest of your super into this pension account up to a certain limit, keeping in mind the income you receive is based on the amount you have in super, so won’t necessarily guarantee an income for life.

You won't be limited to what you can withdraw, but there will be an annual minimum withdrawal amount. It may provide tax advantages and more investment options than withdrawing your super as a lump sum, so when you do get to this point, it's worth looking into. For more information, check out our website.

I want to emphasise here too that it’s never too early or too late to get expert advice. Seeking advice before you retire can make a big difference. Not only might it be your last chance to get money into super, there could be other important things to factor into your retirement planning. For instance, ways to reduce existing debt you might have, and whether any insurance cover you might have is going to meet your changing needs. You'll also want to be across your super investment options and ensure you’ve nominated super beneficiaries, and have a will and estate plan in place. We can also look at possible ways to maximise your current income, potentially pay less in tax, and review the level of risk tied to your investment options.

If you’re looking for help and advice, you can visit our website, which has a range of tools and calculators.

Qualified financial advisers can also provide members with advice on simple matters at no additional cost, over the phone. This might include advice on making an investment choice, contributing to super, and the insurance options available in your AustralianSuper account. A small fee does apply to advice regarding retirement more broadly, and transition to retirement strategies. For members who may have more complex things to discuss, or would prefer to meet with an adviser in person, AustralianSuper also offers access to financial planners in AustralianSuper offices around the country, which does involve a cost.

If you're interested in learning more about super, we offer a range of webinars at different times throughout the year, so you can tune in from the comfort of your own home, or wherever you have internet access. To find out more or to check out other videos, visit australiansuper.com/webinars

Thank you for taking the time to join our Planning for retirement sooner rather than later presentation. We wish you all the best on your financial journey.

Welcome and thank you for taking the time to join our presentation today.

When market conditions change, particularly after many years of positive returns, it's normal for people to feel a bit unsettled about their investments. You might be wondering, should you change to a more conservative investment option? Should you hold the course in case markets rebound and you're able to recover your losses? How might you lessen some of the investment risk? These are common questions during periods of market downturns, which our panel will talk through today.

My name is Peter Treseder, and I'm an Education Manager at AustralianSuper. Joining me is our Head of Diversified Portfolios, Justine O'Connell, and one of our Financial Planners, Steve Lambou, who is an authorised representative of Industry Fund Services.

This presentation may include general financial advice, which doesn't take into account your personal objectives, financial situation or needs. Before making a decision, consider if the information is right for you and read the relevant Product Disclosure Statement and Target Market Determination on the AustralianSuper website.

During this session, we're going to discuss current market conditions, the investment performance of our account based pension, which we at AustralianSuper call a Choice Income account, and the different investment options available.

If you're not familiar with account based pensions, they allow you to withdraw regular, flexible and tax-effective payments out of your super when you retire, or reach age 65 and are still working. For many people, they're a bit like the next part of the super journey. Phase one, you accumulate super in a super account while you're working. Phase two, you draw down super through an account based pension when you retire.

Some of the potential benefits are that your super savings remain invested, and you can generally choose from a range of investment options. Investment returns on account based pensions are also generally tax free, whereas investment returns on super accounts are generally taxed at 15%.

Keep in mind, your account based pension forms part of the income and assets test, so it may affect your eligibility

for a full or part Age Pension. As the income you receive is based on the amount you have in your super, it also won't necessarily guarantee an income for life.

As investment returns from an account based pension are tied to movements in investment markets, they can go up and down, and this is something we'll discuss in more detail in the presentation today. Justine, before I pass to you, can you tell me a bit about your role?

Thanks Peter. So I'm Head of Diversified Portfolios in the Total Portfolio Management Team, which sits within the AustralianSuper's Investment Department. My team and I are responsible for setting the long-term investment strategy for our pre-mixed investment options. The goal is to ensure all our options are well positioned to meet their return objectives within certain constraints. We work closely with the asset class teams within the investment department to do this.

We offer six pre-mixed options and have two return objectives for each. The first is a relative return objective to outperform our peers, and the second is an absolute return objective to beat inflation, plus a margin over the longer term. Our constraints include cost, the amount we can invest in unlisted assets, and how much risk we can take on.

So Justine, in the last financial year, many super funds experienced their first negative returns since the Global Financial Crisis over a decade ago. Could you please explain the approach AustralianSuper takes when investing members’ money in retirement?

Absolutely, Peter. So when we construct the pre-mixed investment options, we consider a number of things such as how inflation affects people's savings over time, what the best mix of assets is to meet the return objectives, and ensuring the portfolio is diversified across different asset classes to help manage portfolio volatility.

We also consider how to position the mix of assets given the economic and policy outlook; and how to invest as much of the portfolio actively as possible, as we believe an active management approach does deliver greater long-term returns for our members.

Going back to inflation, this can erode the value of your savings over time and your spending power in retirement, which is why our pre-mixed options have an objective of outperforming inflation over the long term. For example, our Balanced option seeks to outperform the consumer price index, a measure of inflation, by 4% per annum over the longer term.

Thanks Justine. For those who might not know, the Balanced option is AustralianSuper's default super and account based pension investment option. The default option applies when someone doesn't make an investment choice when they join a super fund. Justine, you mentioned other investment options.

Yeah, Peter. That's right. There are a range of investment options that people can choose from, depending on how hands on they want to be and how much risk they want to take on, keeping in mind exposure to different assets will vary depending on the option chosen.

The strategic asset allocation that you see here is for the Balanced option and shows the key positions we're targeting over the longer term with the flexibility of the bands in the far-right column.

Investing in growth assets, like Australian shares, international shares and private equity, provides opportunities to grow your savings over time. Mid-risk assets such as property, infrastructure and credit provide a balance of growth potential and downside risk protection to act like a ballast in the portfolio. Defensive assets, such as fixed interest and cash provide portfolio stability and liquidity.

We also actively manage the allocation to various asset classes through the cycle to add more outperformance and also to manage risk. For example, at the moment we have less equities and more bonds and cash in the portfolio, relative to our strategic asset allocation, as there are indications we're heading into a recession.

The financial year ending 30 June 2022 was only the fourth negative return the fund has announced in the past 36 years, Justine. So does AustralianSuper make changes in the way it invests when markets retreat?

In the investment team, we see our role as making money for members and increasing their balances, so we share our members’ disappointment when there are negative returns. As you can see here, we’ve had positive returns for 10 years up until this year, noting we’ve still managed to perform better than the SuperRatings SRP50 Balanced Index median return, during the recent volatility.

You've got to keep in mind, it’s normal for markets to go up and down during certain phases of the economic cycle. We saw this during the Global Financial Crisis in 2008 and the COVID downturn in March 2020. So, yes, while there can be short-term downturns in investment markets, historically the growth in asset values has added to member balances over the long term, as you can see from the graph here. $50,000 invested from the 1st of January 2008 in our account based pension Balanced option would now be worth around $135,000 today.

From our perspective, what we seek to do is position the portfolio to take advantage of growth during expansionary economic conditions and reduce risk in the portfolio when recessions are predicted.

So Steve, as a Financial Planner, how do you help members, particularly those who might spend over 20 years in retirement, but potentially they don't see their retirement savings as the same long-term investment that their super was. Where do you start a conversation with a member about investing for their retirement years?

When we catch up with members, we do a deep dive into their risk profile, which is essentially a questionnaire which allows us to assess how comfortable they are with certain investments, and the associated volatility attached. It might be shares or other growth assets, or more defensive assets, such as fixed interest and cash, as Justine mentioned earlier. We try to align recommended investments to their preferred risk tolerance, so they’re comfortable with where their money is invested in retirement and that it meets the “sleep at night test”.

Now what I mean by the “sleep at night test” is we don't want members up at night worrying about their retirement income, so we take steps to ensure the portfolio we set up for them is the one that they're most comfortable with.

One of the first questions we ask members, do you have a specific timeframe for the funds you want to invest? Many members might say they have a long-term investment timeframe of over 15 years, which is most often the case, but quite a few also say their timeframe is five years or less. This is despite they may only be 60 years of age, and their life expectancy is still more than 25 years, and they'd have no need to withdraw most of their super within the five-year timeframe. Many members are also under the impression that everything needs to be held in cash in retirement, and that their money won't last the long haul.

After we have a chat, they realise they can still invest some, if not all, of their assets in the same investment options they were in before they retired, and that the remaining balance after each regular payment is made is still actively invested. It means their regular income in retirement may actually last a lot longer than what they initially thought, and potentially even beyond their life expectancy, which gives them great peace of mind. At the end of the day, it all depends on the individual member’s financial situation and goals. So if you want to know what's right for you, it's best to get some financial advice.

Justine, you spoke earlier about AustralianSuper's Balanced option, could you tell us a bit more about some of the other options that Steve's talked about, which might suit members who are trying to lower their risk tolerance?

AustralianSuper has a range of pre-mixed options that can suit different return objectives and risk tolerances. The Balanced option is the default option because it provides higher potential to outperform inflation over time. Many of our members in retirement also have full or part access to the Government Age Pension, which means they may potentially have an appetite to take on greater amounts of investment risk with their super.

Aside from the Balanced option, we also offer more conservative pre-mixed options for members who may want to reduce the level of risk in their portfolio. The Conservative Balanced and Stable options, as you can see here, have a higher allocation to lower risk asset classes, such as fixed income and cash to reduce volatility.

So Justine, as you reduce the exposure to growth assets, you also potentially reduce the expected level of investment return. How do the objectives between the options differ?

Yeah, absolutely. So this reduction of growth assets, like equities, private equity, correspond with lower expected returns, which is reflected in a lower investment objective. So the margin we expect to deliver above inflation is 2.5% for the Conservative Balanced option and 1.5% for Stable. And you remember that we said earlier, the Balanced option has an objective of 4% above inflation.

Having lower risk also means that there is a lower probability of negative returns, meaning these options may also be suitable for members with shorter-time horizons. Even though they have lower risk, these options do invest a portion of assets in the same asset classes as the Balanced option, but at different weights, giving them the benefit of our active investment approach and exposure to investments in unlisted assets, such as private equity and property, and infrastructure but at lower weights relative to the Balanced option.

So Justine, how have these investment options performed recently?

The average annual performance has corresponded with the level of risk taken by the options. Looking at performance over most time periods, these options have performed in line with expectations for the amount of risk taken by each of the options. That is, higher returns for accepting higher risk and lower returns for accepting lower levels of risk.

But this doesn’t always hold over shorter-time periods. So over the last year, both listed shares and fixed interest assets have had negative returns. This is unusual. Typically, when listed shares fall, bond prices rise as investors prefer to invest their money in lower risk assets.

In this case, bond prices fell at the same time, largely due to the significant and quick rise in interest rates. And, at the same time, concerns about the impact of higher interest rates caused falls in equity markets. The impact of this is that we saw negative returns across all our pre-mixed options. So, while we absolutely manage the portfolios to reduce downside risk, there are shorter time periods during the economic cycle when even conservative options may have negative returns.

The benefit of diversification across asset classes, however, is what helps to balance out returns. While some asset classes had negative returns, the returns of private equity, unlisted property, unlisted infrastructure and private credit had positive returns during the past financial year.

Steve, you mentioned before that a lot of people's minds go straight to cash when they’re thinking about investing in retirement, even though there are other growth orientated options that Justine has outlined.

That's right, Peter. As I said earlier, many members may feel they should go into cash when investing in retirement. It can be helpful to explain that all investments, however, carry some form of risk. Cash, for example, can potentially create a risk that people might outlive their savings, which we call longevity risk.

This is because retirement income streams invested in cash for long periods of time, aren't likely to generate the returns needed for the investment to last as long as someone’s retirement. In other words, whilst cash can offer very stable returns, it offers little in the way of growth, meaning funds generally run out a lot sooner, as you can see here.

After we speak to members about their planned periods of retirement, and consider this time horizon together with their preferred risk tolerance, we often then look at other pre-mixed options. As Justine said, these options contain a level of exposure to growth assets and have different objectives, which is why it's important to weigh the risks and rewards when deciding what's right for you.

Okay, Steve, so once members have chosen the investment mix that suits them best, what flexibility do they have in regard to receiving payments from their account based pension?

There's quite a lot of flexibility, Peter, around the frequency of payments, which might be fortnightly, monthly, quarterly or even annually. You can also choose which investment options your account based pension payments may be drawn from. For instance, many members like to have their payments taken from their portfolio held in cash, so then they don't have to sell down growth assets to make a payment particularly in volatile times.

So Steve, how do you find members react or behave during periods of investment downturns?

Markets moving up and down is a normal part of investing. While it can be tempting to switch options, it's worth considering the investment time horizon intended to support the investment objectives, which can often be long term. It's important to remember that markets do recover, as we've seen during the GFC and also during the COVID, just recently, and sometimes quicker than expected.

Justine’s chart before showed $50,000 invested in 2008 would be worth nearly $135,000 in 2022, which supports the old adage that it's time in the market, not timing the market, that counts.

Justine, looking forward now, what changes do you expect to see in world economies, and how might that impact the way AustralianSuper invests going forward?

AustralianSuper is a patient investor, focusing on how to build the investment options to outperform over three, five, and 10-plus years. We also invest actively across all asset classes, and also adjust the portfolio’s asset allocation based on the current market environment.

In terms of the economic cycle, we see that central banks are focused on price stability and combating inflation, which is putting upward pressure on interest rates, as you know. This increase in interest rates does dampen revenues and profitability for many companies, which then in turn affects their valuation and share prices. There's also potential for recession in many economies around the world and concerns of the impact of rising energy prices, especially in Europe, which may lower returns for members.

The investment team has been anticipating an economic slowdown for some time, and for that reason we've positioned the portfolio for a lower growth environment. Longer term, we’re continuing to build our allocation to unlisted assets, particularly private equity and unlisted infrastructure, as we think these asset classes will deliver strong returns over the long term. To help us do this well and at low cost, we have established offices in London and New York, where we now have large teams of direct investors identifying and assessing attractive assets offshore.

So Steve, if a member needs help with their investment choices, what is the process when they come to see you?

As financial advisers, when we meet with members, we discuss all of this in quite some detail and do an analysis of their position and a risk profile as well. This allows us to then recommend whether a member should stay in the investment option they’re in, or consider a different one.

Members tell us it's really helpful to go through this process to determine what sort of investment option, or mix of investment options, would suit them best. It makes them feel comfortable - remember the “sleep at night test” I mentioned earlier, Peter. It ensures they’re invested appropriately and gives them a better chance to meet their retirement objectives. Most importantly, they feel reassured to have someone qualified to talk to them about their super, so that they don’t feel they're making really important decisions on their own.

During retirement, you should expect financial markets to deliver a wide variety of returns and at times that return will be disappointing. The good news is, over time, markets generally do recover, keeping in mind that the very strong returns we’ve seen over the last decade have been abnormally high.

If you're looking for help and advice, you can visit our website, which has a range of tools and calculators. Qualified financial advisers can also provide members with advice on simple matters at no additional cost over the phone. This might include advice on making an investment choice, contributing to super, and the insurance options available in your AustralianSuper account.

A small fee does apply to advice regarding retirement more broadly, and transition to retirement strategies. For members who have more complex things to discuss or would prefer to meet with an adviser in person, AustralianSuper also offers access to financial planners in AustralianSuper offices around the country, which does involve a cost.

If you're interested in learning more about super, we offer a range of webinars at different times throughout the year, so you can tune in from the comfort of your home or wherever you have internet access. To find out more or to check out other videos, visit australiansuper.com/webinars.

Thank you Justine. Thank you Steve, for joining us. And thank you for joining our Investing in retirement when markets are volatile presentation. We wish you all the best on your retirement journey.