Council on the Ageing Australia chief executive Ian Yates said it would take superannuation funds “quite a few years to get back fully” with the extent of the crisis yet to be seen.
“The issue is uncertainty,” he said, adding it was “inevitable” some would have to work longer as a result. “It is people who are near to retirement who may have had their super in more volatile super accounts [who will be most hard hit].”
He urged people not to pull their money out of superannuation, explaining the “big tragedy in the GFC” was the rush to take funds out of super and the loss of future growth and tax advantages.
A Rice Warner research note said for most people “the correct answer is to hold still and wait it out” with diversified investment funds meaning share market falls don’t fully reflect performance.
“Unfortunately, there is already evidence that many have panicked and moved money to cash – the early movers might feel vindicated but history tells us that the panickers don’t revert back to growth assets, at least not quickly enough, and they all will miss the upturn (probably starting next year).”
Those who try to replace their jobs following redundancy may find it will take months or years during a downturn further affecting super balances, said Callam Pickering, economist for employment website Indeed.
He said the next few weeks were “critical to how well the economy recovers” once the virus is contained.
“Such a sharp fall in financial assets will likely encourage older Australians to delay retirement. We saw this happen during and after the GFC,” he said.
“Superannuation that may have been considered sufficient a few weeks ago suddenly won’t be enough and that will naturally frame the retirement decisions of Australians this year and beyond.”
Industry SuperFunds chief executive Bernie Dean said super was a long-term investment and the market would recover.
“The message for retired Australians or those nearing retirement is that they should speak to their fund or adviser before making rash changes that might crystallise their losses.”
AustralianSuper chief investment officer Mark Delaney said long-term investing helped smooth out drops in the market.
“If you’re close to retirement, you still require a long investment horizon. You might have a 20, or 30 year investment horizon,” he said, adding diversification across property, infrastructure, bonds, corporate debt and shares would help with volatility.
But National Seniors Australia chief advocate Ian Henschke said the government should consider a better universal payment for people losing their jobs, including pensioners.
“The only thing we know is that there are cycles. People may have to work longer,” he said, adding that this has happened to many currently of retirement age due to damage to nest eggs during the Global Financial Crisis.
“It’s only when you have a crisis that you have a close look at how you’re doing things at the moment. And the weaknesses in the system are showing up.”
Jennifer Duke is an economics correspondent for The Sydney Morning Herald and The Age, based at Parliament House in Canberra.