Dear Member,
We are writing to you to ensure that you have the latest news on REI Super’s response to COVID-19, and understand what this means for you and your super. We want to reassure you that we are here to help!
In these uncertain times, our priority continues to be putting your interests first and, at the same time, protecting the health of our people and the community.
We are continuing to monitor advice from the World Health Organisation, the Australian Government Department of Health and state health authorities in respect to responses to COVID-19 (Coronavirus). To protect the health of our people and the community we have been operating the fund remotely since 23 March with all staff working from home.
The pandemic has had an immediate impact on financial markets globally and here in Australia. In response the Australian and State Governments have announced economic stimulus packages, safety net packages, support for JobSeekers, JobKeeper payments for eligible businesses and changes to super rules.
For the most up-to-date information, including full details of support measures and what it means for you and your super, please visit the REI Super COVID-19 Information Hub, which we have developed as a way of providing up-to-date information for members and employers.
Financial Markets
Financial markets have been very volatile, fluctuating up and down within any given trading day. Gains from one day have generally been lost the following day. While it is easy for our members to react to alarming headlines and to panic when events such as this pandemic occur, we believe that a more measured approach is key. While there are many ways this pandemic can impact the assets in which we invest, it is important to separate permanent damage, which will impact what a company is worth over the long-term, versus a temporary correction, which will be forgotten as the market recovers.
Investment Performance
With the volatility in equities that comprise many REI Super portfolios, this has resulted in a decline in the value of the REI Super portfolios. Since the start of the market volatility from 21 February, we have seen markets fluctuate up and down within a single trading day. While there have been days where share markets have recorded material losses, there have also been days where markets have bounced back from the previous day’s lows.
Given this environment, the performance of the portfolios has also been variable. It is important to remember that one of the benefits of investing your super in a diversified portfolio is that the underlying investments have different risk and return drivers, which means that they can behave differently to each other.
The REI Super portfolios are tilted away from the most expensive assets, which tend to be the most vulnerable to market corrections when they happen. It is important to remember that superannuation is a long-term investment and the REI Super portfolios are focused on member returns over the long-term. Instead of trying to predict or guess how this global coronavirus pandemic will unfold in the short-term, we are focused on the long-term retirement outcomes of our members.
Liquidity and Unlisted Assets
We, like many well-diversified superannuation funds, invest in a wide range of assets which are both listed (e.g. securities held in public investment markets like stock exchanges), and unlisted, such as property.
However, given that unlisted assets are not as ‘liquid’ as some other asset classes and are not listed or traded openly on listed markets in the same way as shares or bonds, they are valued using different valuation methodologies and practices compared to listed assets.
REI Super has a low level of unlisted assets compared to many other funds – we currently hold more than 90% of combined super and pension assets in liquid assets – therefore we have no concerns over the fund's liquidity position.
We continue to monitor liquidity closely, to meet the needs of our members who have retired, to meet the needs of our members who are transitioning to retirement and to meet the needs of our financially disadvantaged members who may take advantage of the early access to super scheme.
Seek professional advice before Switching
Changing investment strategies during a downturn can prove risky. Research1 has shown that investors who attempt to ‘time the markets’ by frequently switching investments generally perform badly over the long term. During the last major market decline – the Global Financial Crisis (GFC) – Industry Super Australia found that members who moved their money from an average balanced industry fund into cash were:
- $4,000 worse off after three months,
- $13,800 worse off after a year,
- $34,800 worse off after five years,
- after seven years would have lost a whopping $46,000 of potential retirement savings.
Source: Industry SuperFunds
If you are considering changing your investment strategy, make sure you speak to a licensed or appropriately authorised financial advisor before you act.
REI Super members have access to professional and cost-effective advice as part of their membership, so call the Member Helpline on 1300 13 44 33 if you need to discuss the investment strategies that are appropriate for you.
Early Access to Super
The Australian Government have also announced early access to super for eligible members, to be administered through the myGov website and available from 20 April 2020.
- eligible members will be able to access up to $10,000 before 1 July;
- and up to a further $10,000 from 1 July for a period of up to three months.
However, accessing superannuation early should be approached with extreme caution and only as a last resort.
Industry Super Australia analysis shows if you’re 25 years old and withdraw $20,000 now, you could lose up to $95,696* in super savings by the time you retire. Why? Because your $20,000 invested in super now is likely to grow over time and if you were to withdraw now, you will lose out on compound interest and long-term growth. See below on what this could mean for you.
| Age |
Starting balance |
Super taken |
Difference at retirement |
| 25 |
$20,000 |
$20,000 |
$95,696 |
| 30 |
$40,000 |
$20,000 |
$79,393 |
| 35 |
$60,000 |
$20,000 |
$65,868 |
| 40 |
$79,000 |
$20,000 |
$54,647 |
| 45 |
$95,000 |
$20,000 |
$45,338 |
| 50 |
$109,000 |
$20,000 |
$37,614 |
Source: Industry SuperFunds. Scenarios modelled by ISA Pty Ltd on 04/05/2020*. See assumptions. Figures are in today’s dollars.
Changes to the super rules for our Members in retirement
The Australian Government is helping retirees to manage the impact of volatility in financial markets on their retirement savings by temporarily reducing superannuation minimum drawdown requirements for account-based pensions and similar products by 50%. The reduction will apply for the 2019-20 and 2020-21 financial years.
The Government is also reducing both the upper and lower social security deeming rates in recognition of the impact of the low interest rate on savings. The reduction is a further 0.25% to 0.50% reduction to both rates announced on 12 March. As of 1 May, the upper deeming rate will be 2.25% and the lower deeming rate will be 0.25%.
For more information about these changes, please visit Treasury - Coronavirus, which includes a factsheet for retirees.
Conclusion
We understand you may have questions and we are working hard to help our members and employers as fast as we can, particularly those who are most vulnerable, or closest to or in retirement.
As our call centre is experiencing a high number of calls, we ask for your patience or that you login to your account via our website.
Our primary focus right now is managing through the effects of the COVID-19 outbreak and ensuring that we are doing everything possible to support our members and employers through this.
On behalf of the team at REI Super, thank you for your patience and please take care of yourselves and your loved ones.
Kind Regards,
Claire Higgins & Jarrod Coysh
Keep up to date: REI Super COVID-19 Information hub
1 Industry Super Australia: Industry SuperFunds can withstand the market’s Coronavirus shock