Retirement Pension Options Over 10 Years

17 May 2016

CANSTAR calculates the difference in account balance for an account-based pension over 10 years, depending on your choice of investment asset classes.

It’s important to protect your wealth in retirement – but it’s also important to have some potential growth as well.

In this year’s ratings, we decided to calculate the difference in account balance you could have over 10 years depending on what asset classes you choose to invest in. We compared a fund invested in cash only, versus a fund invested in 20% cash and 80% high growth assets.


We have made a couple of assumptions in making these calculations:

  • Opened account in 2005 (assessing balance to 2015)
  • Starting Balance: $500,000
  • Drawdown: $40,000/year, indexed at 2%

We have used performance data from Morningstar, including the average return of cash only funds and the average return of growth funds.

Fund Type Asset Allocation Test Sample Size Average Performance of 10 Years Total Return
Cash Fund Investing 100% in Cash and Fixed Interest assets 80 40.93%
Growth Fund Investing at least 80% in the Growth assets 443 62.96%
Source: MorningStar Data, current as at 31 December 2015

The range of returns we saw

There’s no easier way to see the sayings in action, that cash is “safe and reliable”, or that growth is “risky but rewarding”, than to look at the average fund’s returns over the long-term.

Different funds use different investment terms or timeframes, such as monthly or quarterly. The best returns that a Cash /fixed interest Fund might see over 10 years could be 88.07% over 10 years, while their lowest returns could be 13.99%. Meanwhile, a Growth Fund could see returns as high as 247.93% over 10 years – and negative returns as low as -26.09% over 10 years.

How your account balance would grow

What that level of returns means is that if you started with an account balance of $500,000, and had to draw down $40,000/year, indexed at 2%, then 10 years later you could be looking at an average account balance of:

  • Cash Fund: $677,779
  • Growth Fund: $834,638

That shows a $156,859 difference between funds, based simply on their investment asset allocations. Remember though – that’s an average. For both cash and growth asset allocations, if you were unlucky enough to be in a below-average fund your account balance after 10 years could be significantly lower than this!

This makes it vitally important that you never just let yourself fall into the “Default” slot for your account-based pension when you hit retirement.

Instead, be actively involved in your retirement before you get there. Watch your super balance as it grows. Choose investment asset allocations that suit your investment goals, life stage and risk appetite When you open an account-based pension, once again choose the asset allocations that will provide the returns that best suit your retirement goals. At all stages, ensure that you get professional financial advice that takes into account your personal situation.

Naturally, past performance is no guarantee of future performance. One cannot assume when looking at any fund’s products that their cash fund or growth fund would produce the same returns as we’ve seen over the past 10 years. CANSTAR has harnessed this data from Morningstar for the purposes of comparison and evaluation of past performance only.

How to find an outstanding value account-based pension

In 2016, CANSTAR has researched and rated 64 account based pension products from 58 different providers. Our research shows which accounts reward you with outstanding value for your retirement income stream.


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