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Converting paper returns to real wealth in retirement

"Superannuation isn't about how much money you make on paper at any point in time, but how much real wealth you're able to realise as purchasing power in retirement." Alison Tarditi, Chief Investment Officer, CSC

15 Dec 2021

Our investment offering looks different from other super funds, because it is.
We're proud of the fact that it's not designed for the average Australian, but purposefully tailored to you, our Commonwealth Government employees and members of the Defence Forces.
Our investment team comprises a select number of globally recognised and respected experts in their individual fields.
Our experience together for well over a decade; our recognised thought leadership amongst the global investing community; and our specialised investment partnerships, are all hugely differentiating in the Australian super landscape.

Future proofing your retirement savings

We constantly look ahead, innovate and allocate your capital to opportunities that others follow us into, opportunities chosen because we believe they can improve your retirement outcomes, not because we're following the latest market fads.

Our focus is on building resilient portfolios, full of high-quality assets that we steward well so that their value and income supporting characteristics are underwritten and, where possible, futureproofed. Our aim is to invest all of our portfolios, not just one particular slice, in ways that don't inherently harm others and go further to genuinely deliver positive but enduring change.

Our Aggressive and Income-focused options, designed for our youngest and our oldest customers respectively, are consistently within the top 10 in their peer categories over all time periods1. Our difference as a team and in the investment options we build reflects our commitment to do what we say we will, to try to provide each of our customers with a comfortable retirement.

Are my savings growing enough?

If, like my senior investment team and I, your super is invested according to our default balanced option, this strategy is specifically designed to maximise the likelihood that all of us will achieve a comfortable retirement income standard – as recommended by our industry association.

Only around 25% of Australians reach that standard upon retirement today, but if you're an average full-time PSSap or ADF customer, as at June 2021, you're actually on track to retire with an estimated retirement lump sum that's 30% higher than the comfortable retirement lump sum standard. 

Are my savings growing enough?

We also focus on making sure your balance is resilient and sustainable, so that you actually get this level of income when you do retire. This means, our balanced (MySuper) option takes less risk on average than other super funds – whose average customer has not yet achieved this level of retirement adequacy, and therefore must continue to hold a riskier portfolio.

We did not appear in the ATO's top 10 returning MySuper default funds for the past seven years to June 2021 precisely because of this.

Over this particular post-financial crisis period, asset values have steadily inflated, as interest rates around the world were progressively reduced to now historically low levels and policymakers stepped in to postpone potential corporate defaults, in the hope that economic growth could be broadened and sustainability restored.

MySuper options with a constantly high level of risk naturally generated the highest returns over this particular period, and they also weathered the greatest losses through the inevitable market corrections. By comparison, our MySuper option has consistently grown your savings by an average of 9% per annum over the past decade, which is around the MySuper product median, but importantly generated with far less embedded risk. This means that our capacity to maintain this average performance rate regardless of economic conditions ahead is relatively higher than others.

The proof of this lies in our independent ranking well within the top 10 funds across Australia over 10 years in terms of returns per unit of risk. Now, that sounds like a rather technical term but it just means that you can have a higher degree of confidence that every percentage point of return we generate for you on paper will likely convert to real wealth when you need it in retirement.

Life-stage option choices deliver competitive returns with less risk

Investment option Target nominal return (CPI) 1 year return after costs 10 year average returns after costs Ranking vs peers Net returns per unit of risk  
Aggressive 6.3% 24.4% 11.0% #1/41 1st place
MySuper (Default) 5.5% 19.0% 8.9% #7/46 7th place
Income-Focused 3.8% 8.8% 6.4% #1/43 1st place

Source: CSC, SuperRatings to 31 August 2021 (post fees, post tax). CSC also provides a Cash option.

This is a deliberate design feature of our balanced option, because none of us can predict the future with 100% certainty. It means that through adverse market environments, including the pandemic correction in March last year, your savings fell 40% less than those of customers in the average MySuper option. The smaller the losses, the greater the share of any future returns that can go to actually growing your savings, rather than just restoring them to their pre-event level.

Default MySuper option: designed for our customers not peers

Performance relative to peers over the 10 years to 31 August 2021

Peer comparison chart

Source: CSC, SuperRatings as at 31 August 2021

Read our investment philosophy

But we also step back into risk when we expect the payoff for doing so to be sustained and fair. For example, with evidence of vaccine efficacy and economic stabilisation, we unwound the defensive strategies we held through February and March last year, enabling your MySuper savings to grow by a very healthy 19% when it was safe to do so over the past year to September 2021. So, the retirement income that your level of savings can support was better preserved through even the most tumultuous of market environments.

This strategy means that we easily passed the annual performance test applied to MySuper options by our regulator, the Australian Prudential Regulation Authority (APRA).

How do I choose between the investment options?

As well as our default MySuper investment strategy, we also provide two premixed investment options specifically designed to meet the different financial circumstances you face at the bookends of your working life cycle. Around 18% of all our PSSap and ADF customers have actively chosen one of these.

Our active younger customers, typically 25 to 49 years of age, choose our Aggressive option, which can take more risk because with a long time to retirement there's greater certainty that your balance can recover from an unexpected adverse market event. This option is often the best performing fund of its type and easily within the top 10 of its peer group over 10 years2.

Our active older customers at the other end of their working life, 50 years and above, typically choose our Income-focused option, which takes lower risk to protect your balance from permanent impairment, as you approach retirement. This option is also consistently a top performing fund of its type and again, comfortably within the top 10 over 10 years3.

So, regardless of which of our investment options you're in – our MySuper Balanced, our Aggressive or our Income-focused option – their ability to convert investment risk into enduring returns after costs has historically been consistently very high.

In summary, your superannuation, like my own, is not a Monopoly board game, so it isn't how much money you make on paper at any point in time that matters, but how much of that real wealth you're able to keep and to realise as purchasing power over and above inflation in retirement.

1 Source: SuperRatings

2 Source: SuperRatings as at 31 October 2021

3 Source: SuperRatings as at 31 October 2021

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