In this guide
After a nervous start, pension funds finished December and the 2025 calendar year on a bright note. The median Growth fund (61–80% in growth assets) was up 0.4% over the month to post a stellar annual return of 10.2%.
International shares were the main driver of returns in 2025, with international shares up 18.6% on a currency-hedged basis, but 12.5% unhedged due to the stronger Aussie dollar (up from US$0.62 to US$0.67). Australian shares were up a more modest 10.7%.Â
Chant West senior investment research manager Mano Mohankumar says Growth funds, on average, have 31% of their total investments in international shares and a further 25% in Australian shares.
Remarkably, given worsening geopolitical tension, tariff uncertainty and a difficult investment environment, all major asset classes produced positive returns in 2025. Traditional defensive assets also held up well, with cash returning 4%, Australian bonds 3.2% and international bonds 4.4%. Australian and international listed property were up 9.7% and 7.5% respectively, while international listed infrastructure returned 11.6%.
Unlisted assets also performed well. While final returns are still being calculated, Chant West estimates that unlisted infrastructure gained 7–10% over the year and private equity finished with a low double-digit return. Even unlisted property was back in positive territory with an estimated return of 3–6%, after two years in the red.
As a result, even the most conservative investment option (21–40% growth assets) returned 6.9% in the year to December.
At this rate, most retirees will have seen their pension account balance grow in 2025 even after withdrawing their minimum pension payments.
The table below shows median pension fund performance across various timeframes for five investment categories to the end of December 2025.
Pension fund performance (results to 31 December 2025)
| Risk category (% growth assets) | 1 mth (%) | 3 mths (%) | FYTD (%) | 1 yr (%) | 3 yrs (% per yr) | 5 yrs (% per yr) | 7 yrs (% per yr) | 10 yrs (% per yr) | 15 yrs (% per yr) |
|---|---|---|---|---|---|---|---|---|---|
| All Growth (96–100%) | 0.5 | 1.4 | 7.3 | 13.1 | 15.3 | 11.1 | 11.3 | 9.7 | 10.1 |
| High Growth (81–95%) | 0.5 | 1.3 | 6.3 | 11.3 | 13.3 | 10.0 | 10.9 | 9.9 | 9.8 |
| Growth (61–80%) | 0.4 | 1.2 | 5.4 | 10.2 | 11.4 | 8.4 | 9.0 | 8.4 | 8.7 |
| Balanced (41–60%) | 0.3 | 1.0 | 4.3 | 8.8 | 9.4 | 6.7 | 7.1 | 6.9 | 7.3 |
| Conservative (21–40%) | 0.2 | 0.8 | 3.1 | 6.9 | 7.0 | 4.9 | 5.2 | 5.2 | 5.9 |
Source: Chant West. Performance is shown net of investment fees and tax, before administration fees and adviser commissions.
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, over the last 15 years, pension Growth funds returned 8.7% per year, on average, while the accumulation equivalent returned 7.8% – a difference of almost 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 November, the median return for pension Growth funds was -0.5%, compared with -0.4% for the accumulation equivalent. Only Balanced and Conservative pension options posted the same loss as their accumulation equivalents, at -0.3% and -0.1% respectively.
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.
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