Wednesday, 21 October 2020
Industry Q&A: Superannuation in the Resources Sector - 2019 and Beyond
Austmine Limited

Industry Q&A: Superannuation in the Resources Sector - 2019 and Beyond

Superannuation is a very important part of a person’s wealth accumulation and financial wellbeing.  Let’s face it, we are all getting older each and every day and ultimately heading towards retirement. It’s human nature to put these thoughts and planning to the back of our mind, even though we know we shouldn’t. 

In light of this and the recent spotlight on superannuation we caught up with Todd Livesley from Resource Super (General Manager, West Coast) to gain some insights.

Superannuation has been in the media quite a bit of late, with the Royal Commission and share market volatility, what does it all mean and what’s the outlook?

There certainly has been a fair bit of coverage lately. If we start with the market, it has been a bit of a seesaw ride when you look at the back end of 2018 and the start of 2019.

We saw a big sell off in the December quarter with global shares down 13.3% ¹.  In the US, all the gains from 2018 were wiped off in that period leading into Christmas.  Yet the market has shown plenty of resilience and bounced back well in 2019, with the ASX 200, Dow Jones and global shares as a whole, largely recouping the losses seen in late 2018. 

It’s important to note that this volatility came off the back end of a really strong period of growth in equity markets, particularly in the US.  In the five years leading up to September 2018, the Dow Jones had climbed over 40%, and if you go further back to the lows of the GFC, its up over  270%.  Whilst the returns here in Australia were modest in comparison, it has been a strong period overall, and superannuation funds have performed really well.  

In some respects, based on this alone, one could argue a correction was imminent, and many US stocks certainly felt over-priced.  Couple this with the US and China trade war, interest rate hikes in the US and general uncertainty over US, and global growth, you can see why it’s been a volatile period.

In terms of the outlook, it’s an interesting dynamic, economic and corporate earnings in the US will likely slow and they may even see a recession looking further ahead to 2020. That said the situation in Europe should improve as we should see some of the concerns such as Brexit and the budget conflict with the European Union ease, and growth on the improve. 

"Overall, modest global growth is expected, and whilst there is a risk of a further sell off, it’s quite foreseeable that in 2019, despite the predicted volatile market, we will still see positive returns, albeit more subdued."

Locally, the economic conditions are overall favourable.  We have seen jobs growth, and a reduction in the unemployment rate.  The resources sector has been a valuable contributor, particularly in the LNG space.  Despite some challenges, such as drought affected areas, and falling house prices, growth in the short term appears to be at or above trend.

In regards to the Royal Commission, it highlighted several examples of extremely poor conduct, systems and procedures, at a number of institutions, (Resource Super was not one of them).   We have always been driven by the philosophy of improving the lives of our members.  It is a very unfortunate situation when you have examples of people’s trust being abused, and funds behaving in a manner that is not in the best interest of clients.  In regards to what it means for the industry, time will tell as to what recommendations will be implemented. The industry is certainly on notice and I would hope that practices such as those highlighted, are behind us, as well as any others that go against doing the right thing by customers. 

What are some of the challenges and trends you see affecting those in the resources sector,  when it comes to managing their superannuation and overall finances?

Higher than average salaries (and as a result higher than average mortgages), a transient work force, time spent away from family, fluctuating wages, high discretionary spending and perceived hazardous jobs. These are just some of the characteristics of the resources sector.  As with the underlying commodity prices, there are a number of variables that make it challenging to plan, but plan you must.

What the above scenario means is that many in the resources sector are living week to week, with very little rainy-day money, or firm a savings plan. They are likely to have inadequate insurance coverage to protect their income and family, and may have multiple super accounts, paying multiple fees and insurance premiums.  Whether people work on a mine site or in the office, many of these themes still play out.

Few people actually take the time to sit down (especially with their partner) and evaluate how they’re placed and what their financial goals are.  When it comes to superannuation, it is often referred to as a set and forget investment, but the trouble is, many people forget to do the set part!

Budgets are not for everyone, and don’t need to be followed strictly, but it is important to assess where your money is going and review your spending habits. One thing to consider is to allocate and separate a portion of your wage to daily expenses (and small splurges), as well as an account to cover for periods you may be out of work, or other unforeseen circumstances and of course a portion to general savings or investing.  You will get comfort from knowing that you have funds to cover emergencies, as well as building towards your future, such as via superannuation.

"The general rule of thumb has been to pay off your mortgage and worry about superannuation later, but with interest rates at historical lows, and the added benefit of saving tax via salary sacrifice, people should really consider putting extra money into superannuation, after all, relying purely on employer contributions will likely lead to a shortfall in your nest egg. You can contact your payroll team to initiate the process."

So, the first step is really to devote a bit of time to sit down (with your partner if you have one) and go through your ingoings and outgoings and establish some goals and a bit of structure around where your hard earned is going.  It is also important to understand if you have adequate insurances to protect yourself, such as Life Insurance and Income protection.  Of course, it is always wise to seek advice to help you navigate the next steps.

What role does Resource Super play in supporting people in the Resource’s sector?

We recognise that a degree of apathy exists when it comes to superannuation, and as such are very proactive and accessible when it comes to engaging with our members, which is particularly important in the resources sector.  Our purpose-built superannuation solutions and service model help to tackle some of the challenges highlighted earlier, such as inadequate levels of life insurance and making Income Protection more accessible.  We strive to get people’s (superannuation) house in order, such as assisting with finding lost super, consolidating accounts, nominating beneficiaries, selecting investment strategies and reviewing insurance needs.  We go on-site, wherever possible and speak with our members face to face, and where that is not possible we proactively call our members as well. 

We are very much a service orientated business, and our support extends beyond just superannuation.  We see ourselves as more than just a super fund.  We also support our members with their overall well-being.

"In October 2018 we launched a new mental health support program; Mental Health Navigator. We’re incredibly proud of this new program, and it’s a way for us to support our members, and address mental health in the workplace, which is more prevalent in the resources sector."

Mental Health Navigator connects our members and their immediate family to a network of Australian clinical psychologists and psychiatrists to assist with a diagnosis and treatment plan at no cost. At the same time, we also introduced Best Doctors. Best Doctors offers our members and their family access to a network of over 50,000 leading medical specialists to provide an expert second opinion on physical condition when you need it most at no cost. Feedback from our members and employers to date has been fantastic.

1 MSCI World ex Australia Net Accumulaiton Index

The information provided in this interview is of a general nature and should not be construed as financial, tax or legal advice. You may wish to contact Resource Super for further information or assistance.

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