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Considering options in difficult economic times

ESSSuper - 27 Jul 2020

During times of economic uncertainty, it’s natural to consider switching your superannuation investment options. However while markets can be unpredictable, they typically recover over the longer term. Investment insights can help you understand your options and where your super can take you.

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Is the cash option for me

Some superannuation fund members have switched to a more conservative investment option, like cash, in response to the economic impact of the global COVID-19 pandemic. Defensive investment options may be less impacted by market fluctuations. Yet switching to more defensive investment options when the market is down can result in investment losses being locked in when the market recovers.

Superannuation industry cash options are at historic lows. As at July 2020, the Reserve Bank of Australia’s (RBA) benchmark cash rate was re-confirmed at a historically low 0.25 per cent. The RBA has stated the low benchmark cash rate aims to support the economy through this difficult period and will likely be required for some time.

As a result, returns on cash investments are also expected to remain low. The net return for defensive investment options with a higher allocation to cash is likely to be very low and possibly negative after fees.

At ESSSuper, you can choose from a range of diversified investment options to match your investment timeframe and tolerance to risk. You can model different investment options to see how they match your risk appetite using ESSSuper’s Lifetime Supermodeller calculator.

Balancing over the longer term

ESSSuper modelling over a longer-term period shows how growth-oriented investment options can achieve higher balances, compared to those with a higher allocation to cash.

The modelling, shown in Figure 1 below, is based on a member who retires under 65 in September 2008 and invests $300,000 of his/her super into the ESSSuper Retirement Income Stream Cash Option. The member receives pension payments of 4 per cent of their income stream annually. The Income Stream Cash Option is shown compared to the performance of the ESSSuper Income Stream Growth Option and Conservative Option over the same historical period.

This model is for illustrative purposes only and provides an insight into three relative investment option returns within the Income Stream from September 2008 to May 2020.

Figure 1: Retired with $300K in September 2008 and withdrew 4% per annum over a long term period:

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Figure 1 is based on the following assumptions:

  • Returns are compounded actual earning rates of ESSSuper Retirement Income Stream Cash, Conservative and Growth Investment Options from September 2008 to May 2020. For more information about these earning rates click here.
  • There is no allowance for fees, costs or taxes deducted from the balance. 



We are committed to providing exceptional service to our members. If you would like further information or have any other questions you can contact us on 1300 650 161 for Emergency services members and 1300 655 476 for State super members.

Emergency Services Superannuation Board ABN 28 161 296 741, the Trustee of the Emergency Services Superannuation Scheme ABN 85 894 637 037 (ESSSuper). This example has been prepared to assist you make an informed decision about ESSSuper’s products, features and benefits. It is of a general nature only and does not take into account your personal or financial objectives, situation or needs. The example has been provided for illustrative purposes only. It is not intended to be a recommendation or preferred course of action. Before making a decision about an ESSSuper product, you should consider seeking professional advice from a licensed financial adviser.

Investment returns are not guaranteed. All investments carry risks and past investment performance gives no indication of future performance. Benefits in ESSSuper’s Accumulation Plan, Income Streams and Beneficiary Account products are not guaranteed or underwritten by the Victorian Government or ESSSuper, and ESSSuper does not come under the jurisdiction of the Australian Financial Complaints Authority. ESSSuper comes under the jurisdiction of the Victorian Civil and Administrative Tribunal.


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