News

Some pension positives in difficult times

RETIREMENT

07/10/2020

With a virus-induced global economic shutdown occurring alongside an oil price war between Russia and Saudi Arabia, market volatility resulted in mixed performance across financial markets during the year to 30 June 2020.

The US-China trade war and Brexit dominated in the first half of the 2019-20 financial year, causing businesses and consumers to restrain spending, employment and investment. In response, the US Federal Reserve cut interest rates three times and said it remained ready to act in order to sustain the country’s economic expansion.

The Reserve Bank of Australia lowered its cash rates to record levels, while the European Central Bank reduced its deposit rate and introduced fresh stimulus measures. With the support of central banks, share markets rallied through the final quarter of the 2019 calendar year, further buoyed by a de-escalation in the US-China trade tensions after a ‘phase one’ trade deal was agreed.

Toward the end of February 2020 and through much of March, share markets fell dramatically as the coronavirus spread outside of mainland China. To control the spread of the virus worldwide, many countries imposed strict containment measures shutting down non-essential services and activities, which brought large parts of the global economy to a standstill. To limit the economic contraction and sustain the functioning of financial markets, central banks and governments implemented supportive policy measures on an unprecedented scale.

Share markets finished the financial year strongly climbing off their March lows on expectations economic activity would pick up as containment measures were relaxed and there would be ongoing government and central bank support globally.

With more countries emerging from their virus-induced lockdowns, investors bet the worst of the coronavirus pandemic had passed and economic growth would likely begin to accelerate through the second half of the 2020 calendar year; a view backed by encouraging manufacturing activity in places like China, Europe and the US.

Limiting these gains was a string of disappointing economic data; notably news the US economy shrank 4.8% in the year to 31 March 2020 and a spike in US unemployment to levels not seen since the Great Depression.

VISSF continues to meet investment objectives and maximise returns relative to inflation, as measured by the Consumer Price Index (CPI), with our diversified Pension options outperforming their CPI relative investment objectives across their target time horizons and longer periods to 30 June 2020.

See the table below for investment return details.

Pension

Year ended 30 June One year % 3 year compound average
(% p.a.)
5 year compound average
(% p.a.)
7 year compound average
(% p.a.)
10 year compound average
(% p.a.)
All Growth -5.6 4.9 6.3 9.1 9.5
Objective (CPI + 3.5%) 3.2 4.6 4.8 5.0 5.3
Outperformance -8.8 0.3 1.5 4.1 4.2
Balanced -2.5 5.0 5.9 8.1 8.7
Objective (CPI + 3.0%) 2.7 4.1 4.3 4.5 4.8
Outperformance -5.2 0.9 1.6 3.6 3.9
Conservative 1.6 4.8 5.0 6.2 6.9
Objective (CPI + 1.5%) 1.2 2.6 2.8 3.0 3.3
Outperformance 0.4 2.2 2.2 3.2 3.6
Cash 0.8 1.4 1.6 1.8 2.5
Objective (Bloomberg AusBond Bank Bill Index) after fees 0.7 1.4 1.6 1.8 2.5
Outperformance -0.1 0.0 0.1 -0.0 -0.0
Inflation CPI -0.3 1.1 1.3 1.5 1.8

TTR Pension

Year ended 30 June One year % 3 year compound average
(% p.a.)
5 year compound average
(% p.a.)
7 year compound average
(% p.a.)
10 year compound average
(% p.a.)
All Growth -4.5 4.4 6.0 8.9 9.3
Objective (CPI + 3.5%) 3.2 4.6 4.8 5.0 5.3
Outperformance -7.7 -0.2 1.2 3.9 4.0
Balanced -2.4 4.2 5.4 7.8 8.4
Objective (CPI + 3.0%) 2.7 4.1 4.3 4.5 4.8
Outperformance -5.1 0.1 1.1 3.3 3.6
Conservative 1.5 4.2 4.6 5.9 6.7
Objective (CPI + 1.5%) 1.2 2.6 2.8 3.0 3.3
Outperformance 0.3 1.6 1.8 2.9 3.4
Cash 0.6 1.2 1.4 1.7 2.4
Objective (Bloomberg AusBond Bank Bill Index) after fees 0.7 1.4 1.6 1.8 2.5
Outperformance -0.1 -0.2 -0.2 -0.1 -0.1
Inflation CPI -0.3 1.1 1.3 1.5 1.8

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