Can you bear it?

IT'S mail-out time for superannuation statements. On reading their statements, though, members might get a false sense of how well their super is doing. That's because the returns given in the statements are for the year to June 30. Since then, share prices have fallen over concerns about Europe's debt problems and the strength of the US economic recovery.

As share prices fall, so do most account balances because of the high exposure the typical superannuation investment option has to shares.

The second reason account balances will look better is that workers have their 9 per cent compulsory contributions going into their accounts as well as any extra contributions members have salary sacrificed.

For the three months since June 30, the return on the median-performing "balanced" investment option, where most people have their money, is down about 5 per cent.

Given that markets have deteriorated even further in October, it is very likely that account balances will be back to where they were at the middle of last year.

The superannuation research and consultancy business, Chant West, says the three-month return to the end of September is the worst quarterly return since the December 2008 quarter, which followed the collapse of the Lehman Brothers investment bank and signalled the start of the global financial crisis.

Researcher SuperRatings says the average annual return over five years to September 30 is 0.92 per cent and over 10 years to the same date is 5.16 per cent.

It should be no surprise that balanced options have done so poorly given about half of the money, on average, is invested in shares and sharemarkets have had a torrid time.

Options that are more defensively positioned have done much better.

Capital stable options, which under the SuperRatings' categories have only between 20 and 40 per cent of money in "growth" assets such as shares and property, have better returns than balanced options over all time periods, up to and including seven years.

The founder of SuperRatings, Jeff Bresnahan, is not surprised that defensive options are outperforming other options.

He says as long as markets remain unconvinced the problems in Europe have been addressed, investors will continue to switch out of shares and into assets favoured by defensive investment options, such as government bonds.

Bresnahan says despite the turmoil, there has not been a flight to cash options by fund members in the accumulation stage, with the percentage of money in cash options remaining steady at about 3 per cent.

He says that is a good sign, as switching to cash crystallises losses with the possibility of members missing an eventual recovery in balanced option returns as markets recover. Younger accumulators have time on their side.

Retirees have been more active.

SuperRatings' data shows that in 2008, of the money held in allocated pensions about 4 per cent was invested in cash options. That spiked in 2008 to about 15 per cent and has now gone down to about 11 per cent.

Don't miss Money's Quarterly Super Review next week for the latest news and analysis.