Retirees reap the rewards after another year of sky-high super returns​on January 31, 2025 at 6:04 pm

The biggest reason for this outperformance? Tax. Once you move your super into the retirement or pension phase, the investment earnings in your fund become completely tax-free. Every dollar of return stays in your account, either adding to your income or compounding for future years.

Over a decade, this tax-free compounding can mean tens of thousands of extra dollars in your retirement balance – just by understanding the retirement phase and making the right move at the right time for you.

Your fund has one job: growing your retirement savings. So, is it doing it well?

For anyone nearing or over 60, consider this your nudge to take a closer look at the retirement (or pension) phase of super – especially if you’re at the turning point. Understanding how it works and when to transition could mean more money working for you, higher returns, and a bigger financial cushion for the years ahead.

Yes, you’ll need to start making mandatory drawdowns of 4 per cent from 60-65, increasing as you get older, but the tax-free earnings and compounding benefits can more than make up for it.

I should point out that growth funds weren’t the only standout performers over the calendar year just finished. Balanced funds for the year performed above the long-term average, with the overall median coming in the retirement phase at 9.8 per cent.

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The three best performers in the retirement phase among balanced funds were CFS Firstchoice Moderate with 12.3 per cent returns; Legalsuper Conservative Balanced Funds with 10.9 per cent returns in pension phase and GESB Balanced and Vanguard Super SpendSmart Balanced tied for third with 10.8 per cent returns in pension phase.

These are all one-year returns, offering a snapshot of which funds are shooting the lights out right now. But short-term wins only tell part of the story. The real test? Long-term performance.

That’s why it’s just as important to look at your fund’s 10-year returns – because consistent growth over time matters far more than a single standout year, especially when compounding and consistent income is the goal.

The top-performing growth fund in the retirement phase over the 10 years to December 2024 is Hostplus Balanced, delivering 9.3 per cent annual returns, followed closely by Australian Retirement Trust Balanced at 9.2 per cent and CSCri Aggressive at 9.1 per cent.

You might notice that some of these top funds call themselves ‘balanced’ – but that’s a bit of a misnomer. Many so-called “balanced” funds actually hold 61-80 per cent in growth assets, meaning they’re functionally growth funds. This is a common tactic, as it allows funds to market themselves as balanced while benchmarking against a different category.

True balanced funds, which hold 41-60 per cent in growth assets, had strong but lower long-term returns. The top performers in this category were the Australian Retirement Trust Conservative-Balanced Fund and Vision Super’s Balanced Fund, both delivering 7.3 per cent annual returns over the decade.

Australian Super Conservative Balanced and Hostplus Conservative Balanced followed at 7.1 per cent, with CBUS Conservative Growth returning 6.9 per cent over 10 years.

So, if you’re comparing fund performance, make sure you’re looking at their actual asset allocation – not just the name on the label.

Ultimately, when you see performance data in the headlines, take it as a nudge to check in on your own super. Your fund has one job: growing your retirement savings. So, is it doing it well? Here’s a simple checklist to help you find out.

1. Check your fund’s long-term performance. Start with the 10-year return – this is what really matters. The median return for growth funds in the retirement phase is 8.0 per cent and for balanced funds it’s 6.5 per cent. If your fund is falling short, it’s worth asking why.

2. Look at short-term performance. How did your fund perform in 2024? If you’re in a true growth fund, you should be seeing returns close to the 12.2 per cent median for the retirement phase this year. And for balanced funds the 1-year median was 9.8 per cent. Anything significantly lower should raise a red flag.

3. Review your fees. High admin fees quietly eat away at your returns. Compare what you’re paying with industry benchmarks – because a great return means less if fees are taking a big chunk out of it. Ignore the investment fees. Funds report their returns after they take in their investment fees.

4. Understand your investment mix. Are you in the right investment mix for your age and goals? Some funds call themselves balanced when they’re really growth funds – do you know what you’re actually invested in? And have you contemplated changing it?

5. Engage with your fund. Log into your account, check your numbers, and don’t be afraid to ask questions. If your fund isn’t stacking up, you do have the power to switch. Make sure you understand any retirement bonus eligibility as you look at it.

Bec Wilson is author of the bestseller How to Have an Epic Retirement. She writes a weekly newsletter at epicretirement.net and is host of the Prime Time podcast.

• Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making financial decisions.

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