A conservative super fund option invests primarily in defensive assets — cash, term deposits, and bonds — with a small allocation to growth assets like shares. It targets low volatility and capital preservation, at the cost of lower long-term returns.
What Is a Conservative Super Option?
A conservative investment option typically holds:
| Asset Class | Typical Allocation |
|---|---|
| Australian fixed interest (bonds) | 25–35% |
| International fixed interest | 20–30% |
| Cash | 15–25% |
| Australian shares | 5–10% |
| International shares | 5–10% |
| Other (infrastructure, property) | 0–10% |
Growth assets typically make up 20–40% of the total portfolio, with defensive assets comprising 60–80%. The exact mix varies by fund.
Historical Returns — Conservative Options
Based on APRA data, conservative super options have historically returned approximately:
| Timeframe | Approximate Annual Return |
|---|---|
| 1-year | 4–6% (varies with interest rates) |
| 5-year average | 3–5% per year |
| 10-year average | 4–6% per year |
Past performance is not a reliable indicator of future performance. Returns vary significantly between funds and years.
These returns are lower than balanced or growth options over the long run, but with meaningfully lower volatility — the value of a conservative account rarely falls significantly in a single year.
Who Typically Chooses Conservative?
A conservative option may be appropriate for members:
- Approaching or in retirement — within 2–5 years of drawing down their balance, where a large market fall could have a disproportionate impact
- With a low risk tolerance — members who find significant balance fluctuations stressful, even if they have many years until retirement
- In transition to retirement (TTR) — some TTR members reduce risk exposure while drawing a pension
- Supplementing other income sources — where the super balance is a smaller part of total retirement assets
It is generally not suited to:
- Workers aged 20–50 with decades to grow their balance — the lower return compounds to a significantly lower retirement balance over time
- Members in the accumulation phase where short-term volatility can be ridden out
The Cost of Staying Conservative Too Long
The long-term return difference between conservative and balanced options is significant. Over 30 years, the difference between a 4% and a 7% annual return on a $50,000 starting balance (with no contributions) is roughly:
- 4%: ~$162,000
- 7%: ~$380,000
That gap widens further when contributions are included. Younger members who stay in conservative options throughout their working life often retire with substantially less super than they would have in a balanced or growth option.
Conservative vs Cash Option
Both conservative and cash options are low-risk, but they differ:
| Feature | Conservative | Cash |
|---|---|---|
| Typical return | 4–6% | 3–5% |
| Volatility | Very low | Near zero |
| Interest rate sensitivity | Moderate (bonds) | High (short-term rates) |
| Best use case | Near retirement, lower risk tolerance | Short-term parking of funds, extreme risk aversion |
See Cash Option in Super — When to Switch and When Not To.
Frequently Asked Questions
Is a conservative super option safe? It is lower risk than balanced or growth options, and the balance rarely falls significantly. However, it is not guaranteed — bond values can fall when interest rates rise, and inflation can erode real returns over time.
Can I switch back to a growth option later? Yes. You can change your investment option at any time through your fund’s online portal. There is no fee to switch (though some funds may apply a buy/sell spread). Consider your time horizon before switching.
Does a conservative option affect my insurance? No. Insurance premiums in super are deducted separately regardless of your investment option.
For further reading: Super Fund Investment Options Explained, Balanced Super Fund Option. For advice on which investment option suits your circumstances, speak with a licensed financial adviser through MoneySmart.