Understanding the cash option

Understanding the cash option

Can the Cash Investment option have negative returns?

Members are often advised that investment returns are not guaranteed. This is true for all investment options, including the Cash investment option. While cash assets provide stability, there is still the possibility for them to have a negative return.

The likelihood of this occurring has increased due to COVID-19 impacts.

Low interest rates


The Reserve Bank of Australia (RBA) uses monetary policy (changing the cash rate) to achieve three stated objectives: price stability, full employment, and the economic prosperity and welfare of the Australian people. To meet this mandate, the RBA has incrementally decreased the cash rate over many years. In fact, for over ten years it has not once increased the cash rate.

Tight lockdown restrictions imposed in response to COVID-19 dramatically impacted the global economy. The Australian unemployment rate reached multi-decade highs, and the nation entered its first recession in nearly three decades. To stimulate the economy, the RBA reduced the cash rate even further, and it is now close to zero.  

Low cash rates reduce the expected return of the Cash investment option because it invests in short-dated bank deposits. While the cash rate is a benchmark for the interest rates on these ‘cash’ assets, it is not the only factor. The returns of these assets work on broader demand/supply forces. These market forces could decrease the return of the Cash investment option below the RBA’s cash rate. In this low interest rate environment, after fees and taxes, the return could be slightly negative.

Given cash rates are likely to be low for some time, it is expected that the Cash investment option will continue to return close to zero, and could be negative, over the medium-term, after fees and taxes.

Inflation risk

This is the risk that the low return on cash is not high enough to keep up with the rising prices of goods and services. Put another way, inflation causes cash to lose its buying power.

Low interest rates make cash vulnerable to inflation risk.

What are your investment options?

We encourage our members to seek financial advice before making any changes to their superannuation investments.  If you need help locating one, you can contact the Financial Planning Association of Australia.

Alternatively, you can take advantage of the service available through Industry Fund Services. The financial planners at IFS can advise you about the options available to SA public sector employees. If you would like to make an appointment with an IFS planner, please call Super SA on 1300 162 348 and they will put you in touch.

You can make a start by using our “What type of investor am I?” calculator in the Knowledge Centre section of the website, to find out what level of risk you are comfortable with.

The information in the article above has been prepared in good faith by Funds SA. However, Funds SA does not warrant the accuracy of the information and to the extent permitted by law, disclaims responsibility for any loss or damage of any nature whatsoever which may be suffered by any person directly or indirectly through relying upon it whether that loss or damage is caused by any fault or negligence of Funds SA or otherwise. The information is not intended to constitute advice and persons should seek professional advice before relying on the information.

Super SA has engaged Industry Fund Services Limited (IFS) ABN 54 007 016 195 AFSL No. 232514 to facilitate the provision of financial advice to members of Super SA who wish to take up this service. Further information about the advice services that can be provided by IFS is set out in the relevant Financial Services Guide, a copy of which is available from the IFS Financial Planning team.  IFS is responsible for any advice given to you by its Representatives.

Super SA does not recommend, endorse or accept responsibility for products or services provided by third-party organisations, such as IFS. Super SA does not accept liability for any loss or damage caused by the products and services provided by IFS.

The information shown on this website is general information only. We haven’t considered your needs or objectives when providing the information. You should assess your own financial situation and needs and read the relevant Product Disclosure Statement before deciding about products on this website.

Super SA has engaged Industry Fund Services (IFS) (ABN 54 007 016 195 AFSL No. 232514) to facilitate the provision of limited scope and comprehensive financial advice to members of the superannuation schemes administered by Super SA. Advice is provided by financial planners who are Representatives of IFS. Fees may apply. Further information about the services can be found in the relevant IFS Financial Services Guide, a copy of which is available from your IFS financial planner or by calling Super SA on 1300 162 348. IFS is responsible for any advice given by its Representatives. Super SA does not recommend, endorse or accept responsibility for products or services or products provided or recommended by third-party organisations, including IFS. Super SA does not accept liability for any loss or damage caused by the products and services or products provided or recommended by IFS.

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