COVID-19 and Lifestage investing – a case study

The COVID-19 pandemic has driven significant market volatility, so it’s timely to take a look at how our BT Lifestage investment option has held up.

The difference of a few months

Back in January 2020, our members in the BT Super and BT Super for Life 1980s BT Lifestage investment option were benefitting from returns close to 18%* over the previous 12-month period, given the fund’s higher allocation to growth assets through exposure to share markets and listed property investments.

Not surprisingly over the same period, those invested in the 1950s BT Lifestage investment option, who were close to, or at retirement had lower returns of 9.7%*, given they had more defensive assets in the form of bonds and cash.

Fast forward to March 2020, the impact of COVID-19 saw the markets take a turn for the worse, falling by historical proportions, from the position we were in at January 2020.

Members in the BT Super and BT Super for Life 1950s BT Lifestage investment option saw their returns falling to -2.2%* on a 12-month basis, falling less than those in the 1980s BT Lifestage investment option, which fell to -8.2%*.

Whist there has been a market recovery since March 2020, what we saw over that period is how the BT Lifestage investment option is designed to protect the account balances of members who are closer to, or at retirement.

What is Lifestage investing?

It’s important to remember that superannuation is an investment intended to span decades over a member’s life, and super balances will move up and down with the markets.

So rather than simply focusing on short-term results, understanding that markets can be volatile, how your super fund is designed, and how your money is invested, can help you make informed decisions over the long term.

The BT Lifestage investment option aims to maximise investment returns when members are younger, and over time, gradually reduce their exposure to riskier assets as they approach retirement to help protect their account balance.

This approach helps target higher relative returns for members when they’re younger, and helps protect their savings from investment volatility as they get older.

With the BT Lifestage investment option, your super is invested across growth and defensive assets and is automatically adjusted throughout your working life based on your age.

What does it mean in a market downturn?

There is a ‘silver lining’ from market downturns for members invested in the BT Lifestage investment option.

  • Our younger members, including those in mid-career, generally have time to ride the highs and lows of market fluctuations. And with their investment option allocated more to growth assets, they’re able to benefit over the longer term from buying assets at lower prices during market dips, through the regular payment of employer or voluntary contributions. Over the long term, this helps to boost their overall super balance.
  • Our members who are heading closer to, or are at retirement, have their investments allocated to more defensive assets, which helps protect their overall retirement savings from investment volatility.

If we look at the graph below, you can see the journey that members in the BT Super and BT Super for Life 1950s and 1980s BT Lifestage investment options had with their investments.

The BT Super and BT Super for Life 1950s BT Lifestage investment option helped to protect members during the market falls in February and March due to being designed to protect account balances by taking less investment risk at this stage of their working life.

The BT Super and BT Super for Life 1980s BT Lifestage investment option on the other hand, owing to the higher level of investment risk, fell further during February and March, however benefitted from the subsequent market recovery through to June.

BT 1980s and 1950s Lifestage funds Monthly performance - January  to June 2020
BT 1980s and 1950s Lifestage funds Monthly performance - January to June 2020. Table current as at 30 June 2020.

Whilst it is concerning to see your super drop in value, it’s positive to see that BT is helping to protect super balances for members near or at retirement, and setting up our younger members for market recoveries.

Another reason why we are proud of how we help our members prepare for their best financial future.

 

Next: Lifestage investing

Learn more about investing

Taking the time to lay some foundations for retirement can help you enjoy a rewarding lifestyle once you hang up your work boots. And the time to start is now.

We know that not everyone is the same. With this in mind, BT has a range of investment options, offering you flexibility and choice when personalising your super investment mix.
While the COVID-19 pandemic has impacted financial markets, there are still ways your investments can work hard. Read our four strategies for smart investing during a recession.

Taking the time to lay some foundations for retirement can help you enjoy a rewarding lifestyle once you hang up your work boots. And the time to start is now.

* Performance figures are calculated in accordance with the APRA reporting standards. Total returns are calculated using withdrawal prices appropriate for the month end and take into account management costs, the $6.50 per month administration fee, and earnings tax up to a maximum of 15%.

This information is current as at 27/7/2020.

BT Funds Management Limited ABN 63 002 916 458, AFSL Number 233724, RSE Licence No. L0001090 (BTFM). BTFM, is the trustee and issuer of interests in BT Super, BT Super for Life for Life and BT Super for Life Westpac Group Plan which are part of the Retirement Wrap ABN 39 827 542 991. 

A Product Disclosure Statement (PDS) is available for BT Super, BT Super for Life and BT Super for Life Westpac Group Plan and can be obtained by calling 132 135 or visiting bt.com.au. You should obtain and consider the PDS before deciding whether to acquire, continue to hold or dispose of interests in BT Super for Life, BT Super for Life for Life and BT Super for Life Westpac Group Plan.
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