COVID-19 and your super questions answered

What does this mean for your super?

Well, the answer depends on which ESSSuper fund you are with. But, while we can’t give a single definitive answer, there are good reasons for all ESSSuper members to be optimistic about their super.

What's the impact for Defined Benefit members?

What if you’re an Accumulation Plan or Income Stream member?

While the value of your investments may have been impacted in the short-term, it is important to remember that superannuation is a long-term investment, which includes peaks and troughs along the way. While no-one expected the COVID-19 pandemic, it’s not totally surprising that at some point the investment markets were going to have a bad year after 10 consecutive good years.

In preparation for economic events such as the COVID-19, ESSSuper already has plans in place to reduce market volatility and vulnerability. We use ‘downside protection’ as a key principle in our investment approach, to reduce the impact of volatility on your investments during significant falls in the market.²

We prefer to invest in assets that endeavour to provide the stability to generate long term results. This means the majority of your investment is likely to have a more stable foundation within tangible, real-world assets. Historically, our investment options have been some of the better performing options during market downturns.²

Is it time to change your asset allocation?

ESSSuper Accumulation Plan and Income Stream members have the option to reassess and change the allocation of their investment options. And volatility in the markets like we’ve seen is often a prompt to consider this. However, it’s important to understand that changing investment options now to a lower risk approach, such as switching to cash, could ‘crystalise’ the current market losses. That’s because you're taking the value of the investments at a devalued level, so the opportunity to gain on them as the share market improves over time is lost to you.

Daniel Selioutine, Head of Investments at ESSSuper says, “Switching investment options to lower risk options may inadvertently lock-in investment losses and miss out on the potential for higher returns by being out of the market when it recovers. Market downturns, whatever their trigger may be, are inevitable and temporary. Every crisis, downturn, and recession comes to an end. And it is very likely that this crisis will be no different.”³

The last major period of economic turmoil, the Global Financial Crisis (GFC), is a case in point. After being devastated by the GFC, the stock market hit its lowest point in February 2009. But a major turnaround quickly followed, and by the end of 2009, the market had risen by 46 per cent.¹

It is important to remember that super is a long-term investment, so while investment markets can be unpredictable over the shorter term, they typically recover over the longer term.

If you’re in your 30s and 40s, your super may have decades to recover. And if you're approaching retirement, or already retired, it's still important to stay focused on your long-term investment strategy and consider all your options before making any significant changes.⁴

Want to know more?

We encourage you to seek independent financial advice before making a decision about changing your investment strategy. You may want to speak with an ESSSuper Financial Adviser⁵, who understands the complexities of ESSSuper funds, and can advise on wider financial issues. For an appointment, call our Member Service Centre on 1300 650 161 Emergency service members or 1300 655 476 State super members.