To grow your super over the long term, you need to take some risk. It’s important to understand the level of risk of the different investment options, both for short time periods and longer periods.
Key points:
- The value of your investments can go up and down, and so can your super balance.
- All investments carry a level of risk. The level of risk depends largely on the type of investments (known as asset classes) you’re invested in.
- The risks you need to consider may be different depending on how long you plan to invest and when you will begin drawing an income from your super.
- A key risk over shorter time periods is market volatility - investment prices going up and down.
- A key risk over longer periods is that your investments don’t generate a sufficient return above inflation to stay ahead of the rising cost of living.
- Each investment option has a short-term and long-term risk measure. You can find these in the relevant Product Disclosure Statement or Handbook.
- The risk measures are estimates only and are not guaranteed. Actual outcomes may differ significantly from estimates.
- When you choose an investment option make sure you’re comfortable with the risks and potential losses.
Short-term risk - market volatility
A key risk to your super savings over shorter time periods (less than 5 years) is market volatility. This is the risk of market ups and downs impacting the value of your savings.
In general, the higher the long-term return you’re aiming for, the greater the risk your investment will go up and down in value in the short term. For example, shares typically produce strong long-term returns but can be volatile in the short term, which can make for a bumpy ride. As a result, returns from investment options with a high allocation to shares and other growth assets can vary a lot, and there’s a greater chance of a negative return in any one year. By comparison, options which invest mostly in defensive assets like cash and fixed income tend to produce lower, but more stable, returns.
The short-term risk measure uses the same methodology as the Standard Risk Measure (SRM). The SRM provides an estimate of how many times an investment option might experience a negative annual return in any 20-year period and is based on two things:
- asset class risk and return expectations, and
- an option's investment mix.
It helps you compare different investment options within and across funds.
The table below shows the risk measures including a corresponding:
- risk band – ranging from 1 to 7, where 1 is the lowest risk and 7 is the highest risk, and
- risk label – ranging from Very Low to Very High
Standard Risk Measures
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| Risk band | Risk label | Estimated number of negative annual returns over any 20-year period |
|---|---|---|
| 1 | Very Low | Less than 0.5 |
| 2 | Low | 0.5 to less than 1 |
| 3 | Low to Medium | 1 to less than 2 |
| 4 | Medium | 2 to less than 3 |
| 5 | Medium to High | 3 to less than 4 |
| 6 | High | 4 to less than 6 |
| 7 | Very High | 6 or greater |
Limitations of the Standard Risk Measure
The Standard Risk Measure can help you compare investment options. However, it’s not a complete assessment of all forms of investment risk. For instance, it doesn’t take into account:
- how large a loss might be,
- the impact of administration fees and tax (including franking credits), or
- the potential for a positive return to be less than you may require to meet your retirement objectives.
You should make sure you’re comfortable with the risks and potential losses associated with your chosen investment option(s).
Long-term risk – returns being less than required
Market ups and downs aren’t the only risk to consider. As super is a long-term investment for most people (even in retirement), there is a risk that your investments don’t generate a sufficient return above inflation over longer periods (10 years+) to stay ahead of the rising cost of living over time (i.e. inflation). This is a key risk to consider because it could mean you aren’t able to maintain your current lifestyle in retirement (for those still working), or your super doesn’t last (for those already retired).
The long-term risk measure provides an indication of the likelihood of returns from an investment option being less than CPI (inflation) +3.5% per annum. This is the approximate return the average member is likely to require from their super to be able to achieve, and then maintain, their current lifestyle in retirement.1
Investment options with a lower long-term risk band and label are most likely to generate returns above inflation over the long term. Similar to the SRM, long-term risk levels range from 1 to 7. See the below table for details.
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| Risk band | Risk label | % chance of underperforming CPI + 3.5% p.a.2 |
|---|---|---|
| 1 | Very Low | 0% to less than 5% |
| 2 | Low | 5% to less than 20% |
| 3 | Low to Medium | 20% to less than 40% |
| 4 | Medium | 40% to less than 60% |
| 5 | Medium to High | 60% to less than 80% |
| 6 | High | 80% to less than 95% |
| 7 | Very High | Greater than 95% |
1 Based on Aware Super modelling, August 2025. Refer to the ‘Key assumptions’ below for more information.
2 The likelihood of underperforming CPI + 3.5% p.a. is measured over both the next 10 and 20 years. The relevant risk band and risk label is assigned to each option based on the average of the two periods.
- The long-term risk measure is based on Aware Super modelling as at August 2025.
- It Is based on a member aged 45 at the start of FY26 and planning to retire at age 67, with age 95 being the end of the projection.
- The modelling is undertaken in real terms (i.e. is adjusted for inflation).
- The accumulation phase is deflated using Average Weekly Ordinary Time Earnings (AWOTE), assumed to be 3.7% p.a.
- The retirement phase is deflated using CPI, assumed to be 2.5% p.a.
- Starting balance is $144,000 (median balance for female members at age 45).
- Salary is assumed to be $106,800 at age 45 (average for female members at age 45) indexed with AWOTE at 3.7% p.a.
- Target total retirement income is $59,900 p.a.
- The member’s employer only makes Superannuation Guarantee contributions at the legislated rate of 12%.
- Based on March 2025 Age Pension rates.
- No administration fees or earnings tax are modelled, as investment returns are assumed to be net of fees and tax.
Limitations of the long-term risk measure
The long-term risk measure allows members to compare investment options based on the different long-term returns they are expected to deliver. However, it is not a complete assessment of all forms of investment risk. For instance:
- it doesn’t take into account the extent to which investment returns could differ from benchmark returns,
- it doesn’t take into account the possibility for returns to be negative, and
- it relies on the assumptions listed above which may differ from your personal circumstances/ actual outcomes.
You should make sure you’re comfortable with the risks and potential losses associated with your chosen investment option(s).
Risk measures for our investment options
You can find the short-term (Standard Risk Measures) and long-term risk measures for our investment options and MySuper Lifecycle stages in the below Product Disclosure Statement documents:
- Investment & Fees Handbook (for Future Saver accounts)
- Retirement Income PDS (for Retirement Transition & Retirement Income accounts)
We review the risk measures of each of our investment options annually, or more frequently if there is a material change.
When choosing your investment option(s), the risks you need to consider will be different depending on how long you plan to invest and when you will begin drawing an income from your super. You should think about how long your super will be invested, how long you have to ride out market ups and downs, and how this could impact your investment choices.
- Are you investing your super for a long time? If so, long-term risk will usually be the most relevant risk measure. You may want to invest your savings in an option or options with a low long-term risk measure and a higher allocation to growth assets that is expected to grow your savings above inflation over time.
- Do you plan to start spending your savings over the next five or so years (for example, because you are approaching retirement)? Or are you already retired and drawing an income from your savings? If so, both short and long-term risk will likely be important because a market downturn at this time would mean you have less time for your savings to recover. Choosing an option with a lower allocation to growth assets may be more appropriate and would put you in a well-rounded position across both risk measures. However, being invested in some growth assets will help your savings last.
Future Saver members - by choosing investment options expected to generate returns above inflation over the long-term. In general, investment options with a higher weighting to growth assets, like Australian and international shares, are expected to outperform inflation over the long term. By contrast, investment options that invest mostly in defensive assets, like cash and fixed income, may not earn a sufficient return above inflation to provide you with enough money for retirement.
Retirement Income members - by investing at least part of your savings in assets expected to generate returns above inflation over the long term. In general, investment options with a higher weighting to growth assets, like Australian and international shares, are expected to outperform inflation over the long term. By contrast, investment options that invest mostly in defensive assets, like cash and fixed income, may not earn a sufficient return above inflation to help your savings and income last long into retirement.
Selecting an investment option with the right risk level for you is important because it can have a significant impact on your account balance, and for Retirement Income members, the amount of income you receive in retirement. Just keep in mind that your super savings, and therefore the income you receive in retirement, will be impacted by a range of factors. This includes the number of years you work and contribute to super, the size of your contributions, and whether you withdraw any of your super early.
Where to next?
Understand investment basics
Super is a long-term investment for your future. Understanding how investments work can help you make better investment choices. This can make you feel confident that you’re on the right track to reach your retirement goals.
Change investment options
You can switch your investment options at any time. There is no charge for switching investment options.
Get help deciding the best investment option for you
At Aware Super, we can help you with questions about how to get the most out of your super. You can also pay for financial advice tailored to your specific needs.