Impacts of COVID-19 on superannuation funds

Impact of COVID-19 and related economic support measures on the pension fund sector balance sheet

Released

24/09/2020

Source

Australian National Accounts: Finance and Wealth, June 2020

Household wealth (measured as net worth) stood at $11.1 trillion at the end of June quarter 2020. The largest assets were residential assets (measured as land and dwellings) ($7.2 trillion) and superannuation assets (pension entitlements) ($3.1 trillion). Superannuation is the largest financial asset on the household balance sheet. This spotlight looks at the impacts of the COVID-19 pandemic on superannuation funds.

The superannuation funds balance sheet evolved rapidly through 2020. In the March quarter 2020, superannuation financial assets contracted ($258.4 billion) as the COVID-19 pandemic heightened uncertainty in the global share markets (measured as equity). By the end of June, the sector had partly recovered with an increase of $130.2b in financial assets, as improved investor sentiment drove valuation gains in share markets.

Compositional changes to superannuation assets

While price effects drove the overall movement in superannuation assets during March and June, there were some significant compositional changes to assets, as seen in the graph below.

Superannuation transactions in selected financial assets, current price: original
	Total ($b)	Deposits ($b)	Bonds ($b)	Equities: investment funds ($b)	Equities: non-residents ($b)	Equities: other ($b)	Reserves in life offices ($b)
Jun-07	71.2	36.1	4.1	9.8	6.1	4.5	5.5
Sep-07	21.5	-0.4	1.9	14.0	8.7	1.8	-4.0
Dec-07	10.3	-3.8	0.4	9.9	-2.9	4.3	-0.8
Mar-08	19.6	4.9	-3.0	6.3	1.5	8.4	2.4
Jun-08	14.4	2.9	-0.6	8.3	11.9	-4.6	0.6
Sep-08	17.6	3.5	-4.0	0.5	1.8	4.3	5.3
Dec-08	5.8	5.0	-6.0	-2.9	7.7	8.6	-2.7
Mar-09	5.2	4.0	-1.0	5.3	-3.2	2.8	-0.6
Jun-09	35.3	8.1	5.5	6.2	8.3	2.5	2.1
Sep-09	18.1	1.3	5.1	4.7	-0.8	4.2	0.7
Dec-09	13.9	-0.2	-2.5	6.3	12.0	0.7	0.1
Mar-10	17.5	2.7	3.4	4.3	4.1	4.2	1.3
Jun-10	15.8	-1.0	0.8	3.6	5.3	5.7	3.6
Sep-10	9.2	5.0	-2.0	-3.8	6.4	3.0	1.9
Dec-10	15.5	0.5	1.8	1.0	6.9	6.4	-0.9
Mar-11	16.9	2.8	-1.9	-2.7	6.5	3.5	10.4
Jun-11	26.3	15.6	-1.7	1.6	9.2	1.4	4.2
Sep-11	11.0	3.1	-2.0	3.5	5.9	1.9	-0.4
Dec-11	13.1	3.3	-2.1	9.3	3.7	-5.0	2.1
Mar-12	19.1	2.2	-1.5	8.6	4.0	1.6	4.3
Jun-12	33.7	18.5	-2.2	9.8	1.2	4.5	1.4
Sep-12	14.3	-0.7	2.3	5.6	6.5	0.7	0
Dec-12	16.8	1.5	1.3	13.5	3.7	0.8	-2.8
Mar-13	19.2	4.1	0.9	10.4	5.5	-0.9	-1.0
Jun-13	38.5	4.7	0	15.3	6.5	1.0	6.2
Sep-13	13.6	2.8	2.0	9.7	-1.6	1.7	-0.6
Dec-13	25.0	2.4	1.8	9.2	8.7	2.8	2.0
Mar-14	20.6	6.0	-0.6	11.3	3.3	0.7	-0.1
Jun-14	33.1	1.4	0.5	16.1	8.0	4.0	3.1
Sep-14	23.6	2.0	-1.9	20.1	2.8	2.1	-1.2
Dec-14	22.0	-0.1	-2.0	14.3	6.5	3.4	-1.1
Mar-15	16.8	2.1	-1.6	8.3	4.9	0.8	2.7
Jun-15	34.4	1.7	0.9	18.7	3.2	3.9	6.4
Sep-15	17.8	-2.7	-0.8	13.2	3.1	7.6	-4.5
Dec-15	16.3	0.5	-0.1	8.3	1.3	5.0	0.7
Mar-16	7.9	-2.8	-2.0	8.0	6.0	0.4	-1.8
Jun-16	30.5	11.1	0.4	10.9	6.5	4.4	-5.2
Sep-16	11.1	-1.4	7.2	74.7	8.8	-6.1	-72.6
Dec-16	20.2	-2.4	1.9	10.0	3.0	8.5	0.5
Mar-17	20.9	4.7	0.8	7.0	6.3	0.8	-2.9
Jun-17	40.7	18.1	1.1	9.6	1.0	1.0	2.4
Sep-17	10.2	-16.1	3.5	4.9	11.6	3.9	-0.5
Dec-17	23.6	-3.8	5.4	17.1	5.5	4.3	-1.2
Mar-18	15.5	-1.4	3.0	6.0	7.1	1.3	0.3
Jun-18	23.7	3.9	6.4	12.3	6.7	-0.5	-2.1
Sep-18	14.5	3.6	2.2	5.8	3.4	3.2	-2.6
Dec-18	17.8	-4.1	4.1	5.9	3.8	5.4	-0.6
Mar-19	14.6	5.3	2.2	7.7	4.7	-1.9	-2.9
Jun-19	34.0	10.3	8.7	48.8	5.5	-6.4	-35.8
Sep-19	11.4	7.4	4.0	6.3	8.1	-1.2	-4.4
Dec-19	16.7	-5.9	3.3	2.4	11.1	3.2	-3.0
Mar-20	12.1	36.4	-9.9	-3.5	-8.7	-0.4	-2.3
Jun-20	10.4	4.1	4.2	58.0	-8.4	6.0	-59.0

Superannuation transactions in selected financial assets, current price: original

["","Total","Deposits","Bonds","Equities: investment funds","Equities: non-residents","Equities: other","Reserves in life offices"]

[["Jun-07","Sep-07","Dec-07","Mar-08","Jun-08","Sep-08","Dec-08","Mar-09","Jun-09","Sep-09","Dec-09","Mar-10","Jun-10","Sep-10","Dec-10","Mar-11","Jun-11","Sep-11","Dec-11","Mar-12","Jun-12","Sep-12","Dec-12","Mar-13","Jun-13","Sep-13","Dec-13","Mar-14","Jun-14","Sep-14","Dec-14","Mar-15","Jun-15","Sep-15","Dec-15","Mar-16","Jun-16","Sep-16","Dec-16","Mar-17","Jun-17","Sep-17","Dec-17","Mar-18","Jun-18","Sep-18","Dec-18","Mar-19","Jun-19","Sep-19","Dec-19","Mar-20","Jun-20"],[[71.200000000000003],[21.5],[10.300000000000001],[19.600000000000001],[14.4],[17.600000000000001],[5.7999999999999998],[5.2000000000000002],[35.299999999999997],[18.100000000000001],[13.9],[17.5],[15.800000000000001],[9.1999999999999993],[15.5],[16.899999999999999],[26.300000000000001],[11],[13.1],[19.100000000000001],[33.700000000000003],[14.300000000000001],[16.800000000000001],[19.199999999999999],[38.5],[13.6],[25],[20.600000000000001],[33.100000000000001],[23.600000000000001],[22],[16.800000000000001],[34.399999999999999],[17.800000000000001],[16.300000000000001],[7.9000000000000004],[30.5],[11.1],[20.199999999999999],[20.899999999999999],[40.700000000000003],[10.199999999999999],[23.600000000000001],[15.5],[23.699999999999999],[14.5],[17.800000000000001],[14.6],[34],[11.4],[16.699999999999999],[12.1],[10.4]],[[36.100000000000001],[-0.40000000000000002],[-3.7999999999999998],[4.9000000000000004],[2.8999999999999999],[3.5],[5],[4],[8.0999999999999996],[1.3],[-0.20000000000000001],[2.7000000000000002],[-1],[5],[0.5],[2.7999999999999998],[15.6],[3.1000000000000001],[3.2999999999999998],[2.2000000000000002],[18.5],[-0.69999999999999996],[1.5],[4.0999999999999996],[4.7000000000000002],[2.7999999999999998],[2.3999999999999999],[6],[1.3999999999999999],[2],[-0.10000000000000001],[2.1000000000000001],[1.7],[-2.7000000000000002],[0.5],[-2.7999999999999998],[11.1],[-1.3999999999999999],[-2.3999999999999999],[4.7000000000000002],[18.100000000000001],[-16.100000000000001],[-3.7999999999999998],[-1.3999999999999999],[3.8999999999999999],[3.6000000000000001],[-4.0999999999999996],[5.2999999999999998],[10.300000000000001],[7.4000000000000004],[-5.9000000000000004],[36.399999999999999],[4.0999999999999996]],[[4.0999999999999996],[1.8999999999999999],[0.40000000000000002],[-3],[-0.59999999999999998],[-4],[-6],[-1],[5.5],[5.0999999999999996],[-2.5],[3.3999999999999999],[0.80000000000000004],[-2],[1.8],[-1.8999999999999999],[-1.7],[-2],[-2.1000000000000001],[-1.5],[-2.2000000000000002],[2.2999999999999998],[1.3],[0.90000000000000002],[0],[2],[1.8],[-0.59999999999999998],[0.5],[-1.8999999999999999],[-2],[-1.6000000000000001],[0.90000000000000002],[-0.80000000000000004],[-0.10000000000000001],[-2],[0.40000000000000002],[7.2000000000000002],[1.8999999999999999],[0.80000000000000004],[1.1000000000000001],[3.5],[5.4000000000000004],[3],[6.4000000000000004],[2.2000000000000002],[4.0999999999999996],[2.2000000000000002],[8.6999999999999993],[4],[3.2999999999999998],[-9.9000000000000004],[4.2000000000000002]],[[9.8000000000000007],[14],[9.9000000000000004],[6.2999999999999998],[8.3000000000000007],[0.5],[-2.8999999999999999],[5.2999999999999998],[6.2000000000000002],[4.7000000000000002],[6.2999999999999998],[4.2999999999999998],[3.6000000000000001],[-3.7999999999999998],[1],[-2.7000000000000002],[1.6000000000000001],[3.5],[9.3000000000000007],[8.5999999999999996],[9.8000000000000007],[5.5999999999999996],[13.5],[10.4],[15.300000000000001],[9.6999999999999993],[9.1999999999999993],[11.300000000000001],[16.100000000000001],[20.100000000000001],[14.300000000000001],[8.3000000000000007],[18.699999999999999],[13.199999999999999],[8.3000000000000007],[8],[10.9],[74.700000000000003],[10],[7],[9.5999999999999996],[4.9000000000000004],[17.100000000000001],[6],[12.300000000000001],[5.7999999999999998],[5.9000000000000004],[7.7000000000000002],[48.799999999999997],[6.2999999999999998],[2.3999999999999999],[-3.5],[58]],[[6.0999999999999996],[8.6999999999999993],[-2.8999999999999999],[1.5],[11.9],[1.8],[7.7000000000000002],[-3.2000000000000002],[8.3000000000000007],[-0.80000000000000004],[12],[4.0999999999999996],[5.2999999999999998],[6.4000000000000004],[6.9000000000000004],[6.5],[9.1999999999999993],[5.9000000000000004],[3.7000000000000002],[4],[1.2],[6.5],[3.7000000000000002],[5.5],[6.5],[-1.6000000000000001],[8.6999999999999993],[3.2999999999999998],[8],[2.7999999999999998],[6.5],[4.9000000000000004],[3.2000000000000002],[3.1000000000000001],[1.3],[6],[6.5],[8.8000000000000007],[3],[6.2999999999999998],[1],[11.6],[5.5],[7.0999999999999996],[6.7000000000000002],[3.3999999999999999],[3.7999999999999998],[4.7000000000000002],[5.5],[8.0999999999999996],[11.1],[-8.6999999999999993],[-8.4000000000000004]],[[4.5],[1.8],[4.2999999999999998],[8.4000000000000004],[-4.5999999999999996],[4.2999999999999998],[8.5999999999999996],[2.7999999999999998],[2.5],[4.2000000000000002],[0.69999999999999996],[4.2000000000000002],[5.7000000000000002],[3],[6.4000000000000004],[3.5],[1.3999999999999999],[1.8999999999999999],[-5],[1.6000000000000001],[4.5],[0.69999999999999996],[0.80000000000000004],[-0.90000000000000002],[1],[1.7],[2.7999999999999998],[0.69999999999999996],[4],[2.1000000000000001],[3.3999999999999999],[0.80000000000000004],[3.8999999999999999],[7.5999999999999996],[5],[0.40000000000000002],[4.4000000000000004],[-6.0999999999999996],[8.5],[0.80000000000000004],[1],[3.8999999999999999],[4.2999999999999998],[1.3],[-0.5],[3.2000000000000002],[5.4000000000000004],[-1.8999999999999999],[-6.4000000000000004],[-1.2],[3.2000000000000002],[-0.40000000000000002],[6]],[[5.5],[-4],[-0.80000000000000004],[2.3999999999999999],[0.59999999999999998],[5.2999999999999998],[-2.7000000000000002],[-0.59999999999999998],[2.1000000000000001],[0.69999999999999996],[0.10000000000000001],[1.3],[3.6000000000000001],[1.8999999999999999],[-0.90000000000000002],[10.4],[4.2000000000000002],[-0.40000000000000002],[2.1000000000000001],[4.2999999999999998],[1.3999999999999999],[0],[-2.7999999999999998],[-1],[6.2000000000000002],[-0.59999999999999998],[2],[-0.10000000000000001],[3.1000000000000001],[-1.2],[-1.1000000000000001],[2.7000000000000002],[6.4000000000000004],[-4.5],[0.69999999999999996],[-1.8],[-5.2000000000000002],[-72.599999999999994],[0.5],[-2.8999999999999999],[2.3999999999999999],[-0.5],[-1.2],[0.29999999999999999],[-2.1000000000000001],[-2.6000000000000001],[-0.59999999999999998],[-2.8999999999999999],[-35.799999999999997],[-4.4000000000000004],[-3],[-2.2999999999999998],[-59]]]

[]

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Source: Australian National Accounts: Finance and Wealth, June 2020, Table 18.

Large transactions in reserves in life offices and investment fund equities are due to restructures within superannuation funds. This quarter funds were rerouted due to the sale of an Australian life insurance business.

During the March quarter, superannuation funds increased deposit assets by $37.8 billion to:

meet member requests to switch to lower risk investment options
ensure sufficient cash reserves for the withdrawals in the June quarter from the implementation of the government’s policy for early release of superannuation

In the June quarter, superannuation funds invested a further $4.1b in deposits assets in anticipation of members accessing a second round of early release payments from 1 July. See Economic measurement during COVID-19: Selected issues in the Economic Accounts for a description of the conceptual treatment of the policy within these estimates.

Superannuation funds built the high level of deposits by selling equities and debt securities.

The largest asset class of superannuation funds are equities, making up 71.4% of total assets as at end of June. During the March and June quarters superannuation funds:

reduced their exposure to non-resident (measured as rest of world) equities by selling off $8.7b in March quarter and a further $8.4b in the June quarter. The last time superannuation funds sold off non-resident equities was in September quarter 2013.
redeemed $6.2b of equity units in non-money market and non-financial investment funds in March quarter.

Debt securities made up 7.3% of total assets of superannuation as at the end of June. During:

March quarter, superannuation funds sold $9.9b of long-term and $4.4b of short-term debt securities issued by the Commonwealth government and non-residents.
June quarter, with the increased issuance of debt securities, superannuation funds bought $11.9b of short and long term debt securities issued by authorised deposit taking institutions, the Commonwealth government and non-residents.

Transactions in pension entitlements

The largest liability of superannuation funds are the pension entitlements (measured as equity in reserves of pension funds) of households, which are in turn financial assets of households.

Transactions in pension entitlements, quarterly, current price: original
	Transactions in pension entitlements ($b)
Jun-07	79.6
Sep-07	20.0
Dec-07	11.9
Mar-08	21.7
Jun-08	18.3
Sep-08	17.1
Dec-08	9.7
Mar-09	12.3
Jun-09	36.1
Sep-09	26.4
Dec-09	13.2
Mar-10	15.7
Jun-10	13.3
Sep-10	11.3
Dec-10	17.0
Mar-11	19.7
Jun-11	36.8
Sep-11	14.4
Dec-11	14.9
Mar-12	22.2
Jun-12	36.6
Sep-12	16.8
Dec-12	17.7
Mar-13	20.8
Jun-13	34.4
Sep-13	15.5
Dec-13	24.7
Mar-14	22.1
Jun-14	29.9
Sep-14	18.8
Dec-14	23.9
Mar-15	20.1
Jun-15	36.6
Sep-15	18.2
Dec-15	23.6
Mar-16	14.7
Jun-16	35.0
Sep-16	12.8
Dec-16	23.0
Mar-17	22.8
Jun-17	42.4
Sep-17	14.9
Dec-17	23.4
Mar-18	18.7
Jun-18	28.4
Sep-18	18.4
Dec-18	22.2
Mar-19	19.3
Jun-19	37.0
Sep-19	16.8
Dec-19	19.4
Mar-20	15.4
Jun-20	18.4

Transactions in pension entitlements, quarterly, current price: original

["","Transactions in pension entitlements"]

[["Jun-07","Sep-07","Dec-07","Mar-08","Jun-08","Sep-08","Dec-08","Mar-09","Jun-09","Sep-09","Dec-09","Mar-10","Jun-10","Sep-10","Dec-10","Mar-11","Jun-11","Sep-11","Dec-11","Mar-12","Jun-12","Sep-12","Dec-12","Mar-13","Jun-13","Sep-13","Dec-13","Mar-14","Jun-14","Sep-14","Dec-14","Mar-15","Jun-15","Sep-15","Dec-15","Mar-16","Jun-16","Sep-16","Dec-16","Mar-17","Jun-17","Sep-17","Dec-17","Mar-18","Jun-18","Sep-18","Dec-18","Mar-19","Jun-19","Sep-19","Dec-19","Mar-20","Jun-20"],[[79.599999999999994],[20],[11.9],[21.699999999999999],[18.300000000000001],[17.100000000000001],[9.6999999999999993],[12.300000000000001],[36.100000000000001],[26.399999999999999],[13.199999999999999],[15.699999999999999],[13.300000000000001],[11.300000000000001],[17],[19.699999999999999],[36.799999999999997],[14.4],[14.9],[22.199999999999999],[36.600000000000001],[16.800000000000001],[17.699999999999999],[20.800000000000001],[34.399999999999999],[15.5],[24.699999999999999],[22.100000000000001],[29.899999999999999],[18.800000000000001],[23.899999999999999],[20.100000000000001],[36.600000000000001],[18.199999999999999],[23.600000000000001],[14.699999999999999],[35],[12.800000000000001],[23],[22.800000000000001],[42.399999999999999],[14.9],[23.399999999999999],[18.699999999999999],[28.399999999999999],[18.399999999999999],[22.199999999999999],[19.300000000000001],[37],[16.800000000000001],[19.399999999999999],[15.4],[18.399999999999999]]]

[]

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Source: Australian National Accounts: Finance and Wealth, June 2020, Table 18.

Transactions of pension entitlements are made from employer and employee (includes voluntary) contributions plus investment income earned by the superannuation funds less benefits paid out and administrative expenses.

Transactions of pension entitlements were $18.4b during June quarter, the weakest June quarter estimate since 2010. This was due to:

$18.1 billion of benefits being paid out under the early release of superannuation scheme
lower employer and employee contributions due to jobs losses across the economy
lower voluntary employee contributions as household saved for COVID-19 related emergencies
lower superannuation investment income due to significant decline in dividend income

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Impacts of COVID-19 on superannuation funds

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Compositional changes to superannuation assets

Transactions in pension entitlements

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