Economic & Banking - Your money

Brexit 2016 super funds are losing cash after uk vote




A LARGE slice of Australia’s super fund members are facing negative annual returns on their nest eggs amid turmoil on sharemarkets since Friday.

The shock Brexit vote, which caused a 3 per cent slide in Aussie shares, created further carnage in US, British and European markets yesterday morning.

More than 55 per cent of a typical balanced super fund option is invested in Australian and overseas shares, meaning the current weakness will drag down investment returns that previously were clinging to an annual 1-2 per cent gain for 2015-16.

However, super specialists say that people should not make a sudden decision to sell based on the Brexit turmoil, and instead see it as a long-term investment where negative returns are likely every five to seven years.

Balanced super funds have not had a negative annual return since 2008-09. About 70 per cent of Australians have their money in this option.

SuperRatings chairman Jeff Bresnahan said yesterday that people with balanced funds were likely to end up with annual returns between minus-2 and plus-4 per cent.

I think we will end up with the haves and the have-nots, he said.

We think balanced funds will eke out a positive return of about 1 per cent but it will depend on which fund you are with. For growth options, you will probably be just underwater.

US shares fell further than Australian shares following the announcement that Britain would exit the European Union. The Dow Jones index closed 3.4 per cent lower yesterday morning while the broader S & P 500 index dropped 3.6 per cent.

Londons FTSE shares index fell 3 per cent, and major European markets dropped between 6.8 per cent and 12.5 per cent.

You would like to think that Australian markets have reacted as far as they are going to, but who knows? Mr Bresnahan said. The 2015-16 financial year ends on Thursday.

BT Financial Groups general manager superannuation, Melinda Howes, said nobody knew what the end impact of the Brexit would be on investors.

Markets are an emotional beast and we really dont know how this is going to play out, she said.

Most people in their super are invested fairly heavily in equities, and where markets are volatile that will flow through to peoples account balances.

From where we stand now, we could be in for a negative year, but if I knew what it would do before the end of next week I would probably be a very wealthy woman.

Ms Howes said fund members worried about their super should speak to their financial planner rather than make a knee-jerk reaction. She noted that many of the people who panicked and sold during the Global Financial Crisis had missed out on much of the markets strong rebound.

Super is a very long-term investment and thats even the case for people in retirement now. Todays 65-year-old is likely to live to 92 or 93, she said.

Most peoples super fund statements tell them to expect a negative return every five-to-seven years for a balanced or growth fund.

AMP Capital head of investment strategy Shane Oliver said yesterday that many of Fridays falls were exaggerated because markets had climbed earlier in the week in expectation that Britain would remain in the EU.

While eurozone shares fell 8.6 per cent on Friday they only fell 2.6 per cent over the last week, he said.

Over the week as a whole US shares lost 1.6 per cent, Japanese shares lost 4.2 per cent, Chinese shares fell 1.1 per cent and Australian shares fell 1 per cent. Bad but not monumental.

Believe it or not, the British share market actually rose 2 per cent over the last week.

Why spending 20 million on funding the marriage equality debate will be a massive waste of money




OPINION

IF YOU are struggling to be the loudest voice in a screaming match, theres one thing that can make all the difference money.

Dont believe me? Just ask Kevin Rudd what he thinks of the mining tax.

Given this fact, we probably should have foreseen the latest roadblock to the same-sex marriage plebiscite: a petty debate about whos going to pay.

The plebiscite is already expected to cost about $160 million and has given Labor ammunition to oppose the poll. Over the weekend, it emerged Prime Minister Malcolm Turnbull may have promised an extra $10 million for each side of the debate to help them argue their rival cases.

Mr Turnbull has denied he guaranteed funding and that he only said if money was provided, it would be equal between the yes and no case.

Regardless of whos telling the truth, whats less easy to understand is why this money is actually needed.

As long-time marriage equality supporter Warren Entsch told ABC radio: Theres been that much lobbying, theres been that much pushing on this youd have to be living on another planet not to already ... have your own opinion on this.

Mr Entsch pointed out that many people have already made up their minds on the issue and opinion polls have consistently shown about two-thirds of Australians support same-sex marriage.

Instead of spending millions on expensive ad campaigns, Mr Entsch has suggested the electoral commission could instead provide factsheets on the yes and no cases that laid out factual information without any emotional rhetoric.

RELATED: Labor introduces same-sex marriage bill

But theres been outrage from Liberal backbencher Eric Abetz, who is opposed to same-sex marriage, at the idea the government may not fund the debate.

This idea that you can have a proper plebiscite without funding for the yes and no cases would not be the sort of plebiscite that was envisaged by the partyroom, he told ABC Radio.

This point would be more compelling if either side was actually short of potential sponsors.

In reality, the no case is likely to be bankrolled by churches, which already enjoy tax-free status in Australia, and the yes case can rely on groups such as GetUp!, unions and others.

Australian Christian Lobby boss Lyle Shelton tried to explain the need for funding by tweeting: We cant let foreign donations buy our vote, like Irelands, referring to the Irish referendum that ultimately allowed same-sex marriage.

But no one is saying that either side wont be able to put extra money into their campaigns.

By providing each side $10 million to put their cases, all the government is doing is creating a base level of funding.

Other money will inevitably be tacked on top.

And lets be real what this money will be used for scare campaigns.

Does the idea of even more taxpayer funded attack ads, on the back of one of Australias longest election campaigns, leave anyone else feeling cold?

The reality is, all these millions will be spent on the debate and the result wont even be binding.

Its hard to see the funding as anything but a massive waste of taxpayer money.

Thrust into the global spotlight after the tragic death of her wife Kate and then discriminated against by hospital and funeral home staff, Charlene Strong decided to take a stand that forced a rethink in the US about marriage equality.