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Navigating Coronavirus
market volatility

On 22 March, the Federal Treasurer announced a package of considered, temporary changes to superannuation for people facing significant financial hardship as a result of COVID-19, as well as changes to minimum pension drawdown rates for retirees.

The coronavirus has upended the lives of most Australians.

We asked our clients and the community what’s concerning you the most. You told us the financial and economic implications of this pandemic are creating greater unease than health and wellbeing, or access to goods and services.

With deep experience investing through market cycles, MLC is here to help and guide you through this extraordinary time. We have been careful stewards of clients’ money for many generations.

This dedicated space will be updated regularly to help you, whether you’re new to investing and haven’t experienced a market downturn, interested in Government packages for financial hardship, or want to stay up to date with the latest views of our professional investors.

In all market conditions, including times like now, we encourage you to speak to your financial adviser.

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Differences between current environment and 2008/09 Global Financial Crisis

Current market volatility is distinctly different to the GFC. For one, banks will be part of the solution this time, not the problem. Portfolio Manager, Myooran Mahalingam discusses.

Learn more

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Wealth Warning: Things to consider about the Government's $10K early release of super measure

The Federal Gov't has announced people facing significant financial hardship as a result of the Coronavirus may be able to access a portion of their super early. We look at some of the key points to consider.

Learn more

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Accessing your income stream in retirement, including minimum withdrawal changes

In response to the coronavirus, the government has introduced changes to the minimum amount you’re required to withdraw from your income stream when you retire. In this article, we’ll address what these changes are and provide things you might consider when investing your money.

Learn more

MLC’s team of professional investors brings a wealth of experience in all market cycles to managing the current volatility caused by the coronavirus pandemic. We have been careful stewards of clients’ money for many generations.

Is moving into cash the right thing to do in the current environment? Portfolio Manager, Myooran Mahalingam, shares why maintaining perspective has never been more important.

MLC Chief Investment Officer Jonathan Armitage discusses the recent market correction, how it compares to the GFC in 2008, MLC’s approach to risk management in the lead up to the coronavirus pandemic, and how investments are being managed during this period of volatility.

  • 20 March 2020

    We appreciate that so many of MLC’s clients – businesses, institutions and individuals – are navigating new territory and dealing with significant stress given the coronavirus pandemic and its wide-ranging implications. This is the same for many of our strategic partners.

    It’s important communities come together to share information and support each other. As part of our MLC Wealth community, I want to update you on how MLC is continuing to prudently manage clients’ and members’ investments, while taking special care to look after all our people.

    Our clients and their investments
    As I share this update our investment team is in place and not impacted. Given the breadth and depth of our senior investment team, multiple portfolio managers can take control of portfolios should any single professional be impacted.

    We’ve also moved to split-team arrangements for our key investment professionals who are now working across multiple home and office locations. These actions are part of our established pandemic-response business continuity plan and include any necessary changes to relevant business processes aligned to this altered way of working.

    All MLC portfolios’ liquidity and asset valuations are being very closely monitored. Despite the extreme market volatility, our funds are liquid and we continue to meet client transaction requests.

    Continuity of critical functions
    Teams in other parts of MLC managing critical business functions and processes have also been split across multiple locations. Following guidance from authorities we have implemented ‘social distancing’ so no large-scale gatherings are taking place in person.

    Service continuity is essential and our client contact centres as well as operations, technology and digital teams are all operational across multiple locations.

    Given the important role of key business partners, we are constantly assessing operational resilience of critical outsourced providers, including but not limited to Investment Managers, Custodians and Administrators and the services they provide, for example, unit pricing, to ensure they can continue to partner with us through contingencies.

    Importance of communications
    Timely and relevant communications are important at all times but even more so when our communities are dealing with uncertainty. We have been regularly communicating with clients regarding investment market conditions and our approach to managing their portfolios. We have created specific online portals so people have 24/7 access to up-to-date information and the views of our most senior investment professionals.

    An evolving situation
    While the pandemic situation continues to evolve and government, business and community responses are changing, we are taking sensible actions to ensure we remain fully operational and available to our clients.

    We acknowledge these uncertain times can create concern and we encourage you to be in touch if you have any questions.

    Warm regards at this time.

    Geoff Lloyd

  • When news first broke late last year of COVID-19, investment markets initially adopted a ‘wait and see’ attitude. However, that changed when markets came to realise that a global pandemic would have severe health, social and economic ramifications.

    Stay-at-home directives from governments around the world to try and bring down the rate of coronavirus (COVID-19) infections have effectively shut down many industries, and dragged down economic activity.

    Nation-wide social and economic shut-downs in Australia and many other countries are also contributing to great uncertainty over the earnings outlook for many companies, and this continues to impact share markets.

    Industries like hospitality, entertainment, education, and travel and tourism, for example, have been hit especially hard.

    There is also uncertainty as to when the worst point of the pandemic will pass, when improved treatments to better manage COVID-19 will emerge, and when a vaccine will be available for widespread use.

    Until the worst of the pandemic passes, markets are likely to remain volatile, with large swings both down and up. We expect uncertainty about economic activity and company earnings to keep investors on edge.

  • More market swings are likely as market participants react, and over-react, to new pieces of information.

    Over the past few weeks, there have been days when markets have gone up significantly, as well as down, all in the same day. This kind of see-saw pattern is what you’d expect in what’s known as a ‘bear market’, which is what we’re currently in.

    Big swings in emotions are a feature of bear markets, and big swings are understandable as people are constantly being hit by new pieces of information in a 24/7 world.

    Seeing the value of investments, including superannuation accounts, go down is distressing. People’s long-term goals and dreams are often tied up with their investments that in many cases have been built up over years.

    What we know from past severe market falls, is that they do eventually end, and recoveries follow. But it does take time.

    The 2008/09 Global Financial Crisis (GFC) is the most severe investment downturn in recent memory.

    The GFC did end and was followed by 10 years of strong share market returns as the following statistics show:

    • The Australian share market, as measured by the S&P/ASX 300 Accumulation Index, returned 111% for the 10 years to 31 December 2019.
    • The global share market, as measured by the MSCI ACWI Index (Net dividends invested, in Australian dollars), returned 197% for the 10 years to 31 December 2019.

    Every market event is different. This one is because of a dangerous global virus, and so we can’t say that it will follow the pattern of the GFC or other market downturns and recoveries.

    But history does provide some encouragement that bad investment periods end, and better times eventually arrive.

  • MLC is doing everything we sensibly can to preserve MLC clients’ portfolios from the worst effects of market falls.

    We’re also looking for opportunities to buy good assets that have been over-sold as people have ‘thrown the baby out with the bathwater’ over the past few weeks.

    On the defensive side of the equation — we’ve, amongst other things, been using ‘derivatives strategies’.

    Derivatives provide very cost and time efficient ways of acting on our investment views.

    Derivatives can be thought of as investment insurance. For a small premium — a bit like the premium most people pay for car insurance or house and contents insurance — we can buy protection for clients’ portfolios so that even when markets go down, the portfolios get a return for the derivatives they bought.

    Having a good amount of exposure to foreign currency has been another cushion. The Australian dollar usually weakens when global share markets sell-off, and this period is no different.

    At the same time, foreign currencies like the US dollar and Japanese yen, for example, generally strengthen when share markets fall. This too has happened, and that’s helped to take some of the edge off the negative impact of share market falls on clients’ portfolios.

    We’re starting to see better value in a number of assets that have been sold off and so we’re getting prepared to add some of those assets to clients’ portfolios.

  • Everyone’s risk-tolerance, the time frame they have for judging investment performance, and investment goals is unique. There is no such thing as a ‘one-size fits all’ answer on how to manage a market downturn.

    Seeing the value of investments, including superannuation accounts, go down is distressing. People’s long-term goals and dreams are often tied up with their investments that in many cases have been built up over years.

    What we know from past severe market falls, is that they do eventually end, and recoveries follow. But it does take time.

    The 2008/09 Global Financial Crisis (GFC) is the most severe investment downturn in recent memory. It was upsetting for people to see the value of their investments go down. However, the GFC did end and was followed by 10 years of strong share market returns.

    That’s why people who change their investments immediately after a correction, are taking losses, which reduces their chance of making their money back when markets eventually recover.

    That said, every severe market episode is different, and the time it takes for markets to recover can vary.

    There is more uncertainty this time because this market downturn was set off by a dangerous global virus. Progress in combatting COVID-19 is key to shifting investor moods.

    Investors will likely remain edgy until the worst point of the pandemic is passed, and until improved treatments to better manage COVID-19 emerge. The appearance of a vaccine available for widespread use would be especially welcome by everyone, including investors.

    Above everything else, we recommend you discuss your circumstances and investments, including super, with your financial adviser. If you do not have an adviser, please call us.

  • There is no such things as a ‘one-size fits all’ answer on what the best thing to do is.

    As a generalisation, people close to retirement or in retirement often have many years ahead of them. In those situations, having some exposure to ‘growth assets,’ like shares, is important as their higher return potential (for higher risk), can help to maintain people’s spending power.

    The low interest rates payable on term deposits over the past decade have certainly made it harder for people nearing retirement or in retirement to rely on term deposits to keep pace with the cost of living.

    Equally, being told to simply maintain a long-term view and wait for a market recovery can be grating, particularly if you’re already drawing a pension from your superannuation.

    You need to keep in mind if you change your investment strategy immediately after a correction, you’re taking losses, which reduces your chance of making your money back when markets eventually recover.

    In saying that, it’s understandable if people close to retirement or in retirement want to have more protection through ‘defensive assets’ in portfolios. Being a little more risk averse than someone that’s still earning an income from paid employment or a business, is understandable. That’s why MLC offers a range of portfolios with varying risk and return characteristics to suit different client needs.

    Good financial advice is invaluable. We recommend you discuss your situation with your financial adviser. If you do not have a financial adviser, please call us.

  • Over the past weeks, the Federal Government has announced three economic packages to cushion the economic impact of the Coronavirus. A total of $213.7 billion in support measures aim to help keep Australians in work and support those in need. This includes $17.6 billion from the Government’s first economic package; $66.1 billion in the second economic support package announced on the 22 March; and finally, on 30 March, the Government announced the $130 billion JobKeeper Payment package. 

    There is also a $90 billion facility by the Reserve Bank of Australia to support business lending. The Federal Government also has pledged $20 billion to deliver easier access to finance for small to medium businesses

    Altogether, these budget and financing measures amount to circa 15% of Australia’s national income as measured by GDP. This is a welcome combination of measures for an extraordinary challenge. 

    The Government’s economic support package includes:

    • Support for households including casuals, sole-traders, retirees and those on income support
    • Assistance for businesses to keep people in a job
    • Regulatory protection and financial support for businesses to stay in business

    Under the JobKeeper payment, businesses that meet certain criteria and are significantly impacted by the Coronavirus outbreak will be able to access a subsidy from the Government to help continue paying their employees. This assistance will help businesses to keep people in their jobs and re-start when the crisis is over. For employees, this means they can keep their job and earn an income—even if their hours have been cut. The JobKeeper payment is a temporary scheme open to businesses impacted by the Coronavirus. The JobKeeper payment will also be available to the self-employed.  The Government will provide $1,500 each fortnight per eligible employee for up to 6 months.  

    Additionally, temporary measures for people facing significant financial hardship as a result of the coronavirus include early release of up to $10,000 of their superannuation balance in 2019-20 and a further $10,000 in 2020-21. This measure is estimated to cost $1.2 billion over the forward estimates period.

    For retirees, there will be a temporary reduction in the minimum annual amount required to withdraw from a super income stream. This will apply for this financial year and for the 2020/21 financial year.

    Find out more about temporary changes to superannuation for people facing significant financial hardship as a result of the Coronavirus.

    You can click here to access the Government’s Coronavirus support packages for individuals and households, or by typing treasury.gov.au/coronavirus/households in to your browser.

  • We can only process transaction requests when we receive all required information.

    If accepted, generally transaction requests received by us before 3:00 pm (Sydney time) on any Business Day will receive that day’s unit price. Requests received after 3:00 pm will generally receive the next Business Day’s unit price.

    We usually calculate unit prices as at the end of each Business Day and release them the following Business Day.

    Generally, withdrawal requests will be actioned by us promptly to enable us to make payments within 10 Business Days. Actioning of withdrawal requests and payments may be delayed, for example, if underlying assets need to be sold. In certain circumstances, such as when there are adverse market conditions, we may suspend withdrawals. We may also process requests in instalments over a period of time and may also suspend processing of requests we have already accepted. In certain circumstances we may refuse a withdrawal request. Where withdrawals are delayed, suspended or being paid in instalments, the unit prices used for a withdrawal will be those available on the day the withdrawal takes effect, rather than the day of the withdrawal request.

  • MLC is aware of current scam phone calls targeting Australians. The caller may claim to be from an organisation that can assist you to get early access to your super. The caller may ask for your personal and superannuation details.

    If you ever have any concerns as to the legitimacy of a call, hang up and call the company back on a publicly listed number.

    If you have received this type of call and have provided information about your superannuation, please contact MLC immediately on 132 652.

    If you have provided personal or banking details, you should also contact your financial institution.

    You can also visit the Scamwatch website for more information about this scam.

The Federal Treasurer recently announced a package of considered, temporary changes to superannuation for people facing significant financial hardship as a result of the Coronavirus. You can find more detail on these measures below.

  • On 22 March 2020, the Federal Treasurer announced temporary changes to super for people facing financial hardship as a result of the Coronavirus. This is part of the Government’s Economic Response to the Coronavirus.

    The measures include:

    • Temporary early access to super
      Eligible individuals will be allowed early access to super of up to $10,000 before 1 July 2020 and up to a further $10,000 from 1 July 2020. Meaning, if eligible, you may be able to access up to $20,000 overall.
    • Providing support for retirees
      There will be a temporary reduction in the minimum annual amount that you’re required to withdraw from your super income stream. The reduction in the minimum drawdown rates will apply for this financial year and for the 2020/21 financial year.
  • To be eligible for early release of super you must satisfy any one of the following requirements:

    • You are unemployed.
    • You are eligible to receive a job seeker payment, youth allowance for jobseekers, parenting payment (which includes the single and partnered payments), special benefit or farm household allowance.
    • On or after 1 January 2020:
      -  you were made redundant
      -  your working hours were reduced by 20% or more, or
      -  if you’re a sole trader your business was suspended or there was a reduction in your turnover of 20% or more.
    These payments will be tax-free and won’t be assessable when determining your entitlement to Centrelink or Department of Veterans’ Affairs entitlements.
  • You can apply directly to the ATO through your MyGov account at my.gov.au  To apply, you’ll need to meet the eligibility criteria.

    After the ATO has processed your application, they’ll issue you with a determination. The ATO will also provide a copy of this determination to your superannuation fund, which will advise them to release your superannuation payment.

    Your fund will then make the payment to you, without you needing to apply with them. To make sure you receive your payment as soon as possible, you should contact your fund to check that they have your correct details—including your current bank account details and proof of identity documents.

    Separate arrangements will apply if you’re a member of a self-managed superannuation fund (SMSF).

    More information will be available at ato.gov.au

  • It is expected that applications can be made from mid-April.

    We’ll keep our Coronavirus support page updated as soon as we have more information for you. Visit mlc.com.au/coronavirus

  • To find out more about what documents are required, please refer to the application process at my.gov.au

  • After the ATO has processed your application, they’ll issue you with a determination. The ATO will also provide us with a copy of this determination if you’re a member of our fund, which will direct us to release your superannuation payment.

    We’ll then make the payment to you, without you needing to apply to us directly. The speed at which we can make the payment to you is reliant on us having up-to-date information for you, including your bank account and contact details, and proof of identity documents.

  • For more information on the Australian Government’s Economic Response to the Coronavirus, visit treasury.gov.au/coronavirus

  • The Government is temporarily reducing minimum drawdown requirements for account-based pensions and similar products by 50% for the 2019/20 and 2020/21 financial years.
     

     Age

    Default minimum drawdown rates (%)

    Reduced rates by 50 per cent for the 2019-20 and 2020-21 financial years (%)

    Under 65

    4

    2

    65-74

    5

    2.5

    75-79

    6

    3

    80-84

    7

    3.5

    85-89

    9

    4.5

    90-94

    11

    5.5

    95 or more

    14

    7

  • Yes. This is available to everyone with an account-based pension.

  • Yes. If you are on the standard minimum, or have opted into the new reduced minimum for the 2019/20 financial year, you will automatically receive the reduced minimum from 1 July 2020.

    Further, everyone on a standard minimum or reduced minimum will receive the reduced minimum from 1 July 2020. After reviewing information on this change from the ATO we understand the new reduced minimum rates are the rates intended to be used for all minimum pension drawdown calculations for 2020/2021.

    If you wish to receive a different amount, you can specify the annual amount you’d like paid; however, this must be within the required minimum and maximum (if applicable) limits. You can do this by completing an Update your account details form, or by calling us or your adviser.

MLC Asset Management panel discussion

Managing your super through market volatility
 

Watch now

 

IMPORTANT INFORMATION
This information is accurate as at 7/04/2020. This communication has been prepared by NULIS Nominees Australia Limited (‘NULIS’) ABN 80 008 515 633 AFSL 236465, in its capacity as trustee of the MLC Super Fund. NULIS is a member of the National Australia Bank group of companies (‘NAB Group’). An investment with NULIS does not represent a deposit with or liability of, and is not guaranteed by NAB. This information may constitute general advice. The information contained in this communication is general in nature and does not take into account personal objectives, financial situation or needs and because of that you should, before acting on the advice, consider the appropriateness of the advice having regard to your personal objectives, financial situation and needs, plus consider the relevant Product Disclosure Statement. Opinions constitute our judgement at the time of issue and are subject to change. Neither NULIS nor any member of the NAB Group, nor their employees or directors give any warranty of accuracy or reliability, nor accept any responsibility for errors or omissions in this communication. Past performance is not a reliable indicator of future performance. The value of an investment may rise or fall with the changes in the market.

 

Get in touch

We appreciate the impact of events like these can be unsettling, and that everyone’s situation is different. We recommend you discuss your investment approaches with your financial adviser. If you do not have a financial adviser, please call us.

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