Pension products, tax and performance
When we look at pension products, it is important to note that their performance is not the same as that of the corresponding super products. The reason is largely due to tax – or rather the absence of tax. While investment returns on accumulation assets are subject to 15% income tax and 10% long term capital gains tax, pension assets are not subject to any tax at all.
When markets are rising, pension assets generally grow faster than accumulation assets. Conversely, when markets are falling, pension returns tend to be a little lower. The reason is that, unlike super funds, pension funds are unable to cushion their losses by offsetting them against taxable gains.