Pension fund performance: Monthly returns to May 2025

The good news is the median pension Growth fund (61–80% growth assets) is closing in on a spectacular 10% return, or thereabouts, for the 2025 financial year. After jumping 3% in May, the median pension Growth fund is up 9.8% in the financial year to date – that’s more than 1% higher than the median Growth fund in accumulation phase over the same period.

The strong result was underpinned by positive returns from all major asset classes, especially shares, infrastructure and currency. Investment markets rebounded strongly in May as President Trump backtracked some of the tariff hikes he announced in April.

The bad news is that volatility and uncertainty have increased as markets respond to an escalation of hostilities in the Middle East.

Chant West senior investment research manager Mano Mohankumar says: “The (2025 financial year) experience highlights the importance of remaining patient and not getting distracted by short-term noise.” In other words, members who resisted the itch to switch to a more conservative investment option for their pension fund have been rewarded for their fortitude.

Tax-free returns

Despite holding the same underlying investments, pension fund returns tend to be roughly 10–15% higher than returns for the same category in accumulation phase over the long run. The difference is due largely to tax, as investment earnings are not taxed in retirement phase.

For example, while the median return for pension Growth funds was 3% in May, the median return for accumulation Growth funds was 2.7%. And in the first 10 months of the 2024–25 financial year pension Growth funds returned 9.8% while the accumulation equivalent returned 8.7% – a difference of 1.1%.

Conversely, when returns are negative, pension funds typically generate slightly bigger losses in the short term than accumulation funds in the same category. For example, in the year to 31 December 2022, the median return for pension Growth funds was -5.1%, compared with -4.6% for the accumulation equivalent. Only Conservative pension options posted a smaller loss (-2.8%) than their accumulation equivalent (-2.9%).

Mohankumar says this is because accumulation funds get a deferred tax benefit when returns are negative.

Although people tend to be more risk averse as they get older, he says most retirees are still invested in their fund’s Growth option, where most accumulation members are also invested. For example, he says that in large industry funds, such as AustralianSuper and UniSuper, most pension fund members are in the Balanced option (with an investment mix that aligns with Chant West’s Growth category). Even so, he says a meaningful number would also be invested in the next risk category down, in line with Chant West’s Balanced category with 41–60% growth assets.

Retirees in retail pension funds (and some industry pension funds) are most likely to be invested in a Lifecycle investment option with a conservative investment mix. Lifecycle funds automatically shift members into a lower-risk investment mix as they age.

Over the long term, though, the advantage of holding a meaningful level of growth assets is clear.