Despite tensions in the Middle East and lingering inflation concerns, superannuation pension funds continued their strong run in the year to June 2026, with the median pension Growth fund (61-80% growth assets) up 10.8%.
Once again, shares were the main driver of the result, with international shares delivering strong gains despite a stronger Australian dollar.
International shares returned 25.5% on a currency-hedged basis, and a still-solid 17% unhedged. Australian shares returned a more modest 6.2%.
Chant West’s Head of Superannuation Investment Research, Mano Mohankumar says Growth funds, on average, have 31% of their total investments in international shares and a further 24% in Australian shares.
Despite ongoing geopolitical tension and a difficult investment environment, almost every major asset class produced a positive return over the year. Traditional defensive assets also held up, with cash returning 3.9%, Australian bonds 1.5% and international bonds 2.9%.
Australian listed property was the only asset class to finish in negative territory, down 1.8%, while international listed property and listed infrastructure returned 14.3% and 17.2% respectively.
Final returns for unlisted assets are still being calculated. Chant West expects unlisted infrastructure to return 7% to 9% and private equity 8% to 11%, while unlisted property is expected to post a return of 5% to 7% as its recovery continues.
As a result, even the most conservative investment option (21-40% growth assets) returned 6.5% in the year to June, although higher-risk options were the main beneficiaries of buoyant share markets.
At this rate, most retirees will have seen their pension account balance grow over the year even after withdrawing their minimum pension amount.
Pension fund categories – Conservative, Balanced, Growth, High Growth and All Growth – are the same as those for accumulation funds and, by and large, hold the same underlying investments. So, pension fund returns are driven by the same factors as accumulation fund returns.
Despite holding the same underlying investments, pension fund returns tend to be roughly 10-15% higher than returns for the same category in accumulation phase over the long run. The difference is due largely to tax, as investment earnings are not taxed in retirement phase.
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Find out moreFor example, in the 10 years to 30 June 2026, the median return for pension Growth funds was 8.7% per year on average, while accumulation Growth funds returned 7.8% per year over the same period.
However, when returns are negative, pension funds typically generate slightly bigger losses in the short term than accumulation funds in the same category. For example, in the year to 31 December 2022, the median return for pension Growth funds was -5.1%, compared with -4.6% for the accumulation equivalent. Only Conservative pension options posted a smaller loss (-2.8%) than their accumulation equivalent (-2.9%).
Mohankumar says this is because accumulation funds get a deferred tax benefit when returns are negative.
Although people tend to be more risk averse as they get older, he says most retirees are still invested in their fund’s Growth option, where most accumulation members are also invested. For example, he says that in large industry funds, such as AustralianSuper and UniSuper, most pension fund members are in the Balanced option (with an investment mix that aligns with Chant West’s Growth category). Even so, he says a meaningful number would also be invested in the next risk category down, in line with Chant West’s Balanced category with 41-60% growth assets.
Retirees in retail pension funds (and some industry pension funds) are most likely to be invested in a Lifecycle investment option with a conservative investment mix. Lifecycle funds automatically shift members into a lower-risk investment mix as they age.
In years when shares and listed property perform poorly, as they did in 2022, retirees with a more conservative investment mix will do better than those with a higher exposure to growth assets. The reverse also holds true.
As mentioned earlier, retirees with more exposure to growth assets did best over the year as shares were the star performers. Stout-hearted retirees invested in the median All Growth option pocketed a return of 14.2% for the year to June 2026. Over the long term, though, the advantage of holding a meaningful level of growth assets is clear, as can be seen in the table below.
The following table from Chant West shows pension fund performance across various timeframes for five investment categories at the end of June 2026.
Pension diversified fund performance (results to 30 June 2026)
| Fund category (% growth assets) | 1 yr (%) | 3 yrs (% per yr) | 5 yrs (% per yr) | 7 yrs (% per yr) | 10 yrs (% per yr) | 15 yrs (% per yr) |
|---|---|---|---|---|---|---|
| All Growth (96–100%) | 14.2 | 14.7 | 9.7 | 10.1 | 10.5 | 10.5 |
| High Growth (81–95%) | 11.5 | 12.2 | 8.6 | 9.6 | 10.2 | 10.1 |
| Growth (61–80%) | 10.8 | 10.6 | 7.2 | 8.1 | 8.7 | 8.8 |
| Balanced (41–60%) | 8.7 | 8.8 | 6.1 | 6.5 | 7.0 | 7.4 |
| Conservative (21–40%) | 6.5 | 7.0 | 4.6 | 4.8 | 5.1 | 5.7 |
Note: Performance is shown net of investment fees. It is before administration fees and adviser commissions.
Source: Chant West
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