Here at Qantas Super, we know that interpreting all the information that’s out there about super can be confusing.
For example, while super funds will always tell you that past performance is not an indicator or guarantee of future performance, the industry does paradoxically tend to put them front and centre in promotional materials.
To add to the confusion, funds can report performance in a number of different ways; from credited interest rates to CPI+ objectives, and more, it can be tough to get your head around the different types of numbers.
Here’s a quick explainer to get you up to speed:
Weekly credited interest rates (CIRs)
Investment returns for each option are applied to your account using credited interest rates (CIRs). CIRs represent the net investment returns on the assets for each investment option, after investment fees and tax have been deducted (except for retirement income accounts, where the only tax applicable is franking credits).
CIRs can be positive or negative. The actual investment earnings applied to your account are based on the CIRs for the investment options you’re invested in, the period of time that you were invested in those investment options, and the timing of cash flows into and out of your account.
Qantas Super uploads CIRs to our website on a weekly basis – you can find them here.
Another way we measure performance is by looking at performance over the long term vs inflation, through our CPI+ objectives. CPI stands for the consumer price index, which measures the average change over time in the prices paid by households for a basket of goods and services.
In Australia, the CPI is calculated by the Australian Bureau of Statistics (ABS) and published once a quarter, with its principal purpose to measure inflation faced by households in order to support macro-economic policy decision making. In other words, to help the Reserve Bank of Australia (RBA) manage the economy.
So, why is it important to consider inflation when investing? In the simplest terms, it’s because the buying power of your dollar decreases as inflation occurs over time – think of your grandparents telling you that a litre of milk used to cost 10c.
Given super is a long term investment, it’s important to ensure that the dollars you invest today will be able to support you decades down the line in your retirement, when the prices of the goods and services you buy are likely to have risen significantly from where they are now.
That’s why each of Qantas Super’s investment options aims to deliver a return over and above the long term CPI. For example, our Aggressive option aims to achieve a return that exceeds CPI by at least 4% per annum over a 10 year period, after investment fees and tax.
You can look at how each of our options are performing against their long term CPI objectives here.
Financial year returns
These are probably the types of returns you’re most familiar with – they simply show the return for an investment option over the financial year, net of investment fees and tax.
These returns are typically the easiest to use to see how your super has performed over a financial year – though it’s important to remember that the actual return for your account depends on the period of time you were invested in a particular option, the timing of transactions in and out of your account, and the impacts of compounding.
Per annum over 3, 5, 7, 10 years
While the official calculation is a little more complicated, the simplest explanation of these returns is that they are the average return for an investment option over the particular time period stated.
If a member was invested in our Aggressive option for the six year period to 30 June 2022, for example, they could expect to have received on average a return of 9.0 percent for each of those six years.
Financial year to date returns
These returns, as the name suggests, simply show returns for an investment option in the financial year to date – that is, starting from each 1 July. These returns, like CIRs, are helpful in showing how an option is tracking through the year.
Which returns should I pay attention to?
First and foremost, we can’t go without reminding you one more time that past performance is not a guarantee or indicator of future performance! However, each of the ways super funds report returns are a useful barometer to help you monitor and understand their performance; if you enjoy detail, then checking our weekly CIRs might be up your alley, while others might be happy to check in every couple of months when we publish our quarterly investment insights.
The most important thing to remember is that super is a long-term investment, which means you need to look beyond the short-term ups and downs. While checking in on performance regularly can help you stay informed, you also have to consider the investment horizon of a particular option; for example, our Aggressive option has an investment horizon of 10 years, which means weekly fluctuations in CIRs should not cause concern as there will be many ups and downs in investment markets over the course of 10 years.
A Super Adviser can help you determine which investment option is right for you – you can book a one-on-one appointment as part of your membership.