In perspective

Few super fund members probably would have been taken by surprise when Minister for Superannuation Nick Sherry said in the past week: "Even though there's three months left to the end of the financial year, I'm advised by most funds that it's highly likely that we will see the most widespread negative rates of return than we've seen before."

But Senator Sherry's words provide an extra stamp of reality to what fund members are likely to face with their returns for 2007-08.

Inescapable facts are that the S&P/ASX200 Index is down 15.5% and the All Ordinaries is down 15.8% over the first three months of this calendar year. And these downturns will be reflected - to varying degrees according to asset allocations - in the returns to date of most fund members.

However, fund members should try to keep a looming negative return for the current financial year in perspective.

Since the last bull market resumed its strong upward push from March 2003, the vast majority of super fund members - who have their super savings in the "default", balanced portfolios of large funds - enjoyed four terrific years of double-digit returns.

Even those members who are entering retirement when share markets are depressed can comfort themselves in knowing that their overall retirement savings have generally been boosted by strong past returns, particularly in the last few years.

In saying this, I am in no way trying to play down the concern that many recent and would-be retirees may be now feeling when drawing down on their capital at this time. (For a discussion on impact of the current market on retirees see the Smart Investing piece on March 7 headed 'When retirement plans are derailed by markets'.)

The prevailing highly volatile market and the prospect of negative returns for 2007-08 should serve as a resounding reminder to investors of the desirability of trying to keep investment transaction costs and investment management fees to a minimum wherever possible. In this way, the impact of negative returns can be reduced.