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If you are now, or even have been, an employee and can’t remember ever choosing a superannuation fund, chances are you have retirement savings sitting in one or more MySuper accounts.
As we’re talking about 9.5% of your income (scheduled to increase to 10% on 1 July 2021) and possibly hundreds of thousands of dollars by the time you retire, it’s worth following the money trail to see how your MySuper fund works and how it compares with other funds in the market.
Being in an underperforming MySuper product can leave a typical new workforce entrant $375,000 or 36% worse off by retirement, according to the Productivity Commission, and that’s not the outcome you want.
If you are a member of a MySuper fund, you’re not alone. As at September 2020, 26% of all super assets (or $754 billion) was invested across 14 million member accounts; around half of all super accounts. At the same time, the number of My Super products is falling. There were 84 MySuper funds in September 2020, down from 103 two years earlier, as small underperforming funds either merged with bigger funds or exited the industry.
What are MySuper funds?
MySuper funds act as a default account for people who don’t choose their own super fund when they start a new job. They are designed to be:
- Simple. You will be put into either a single diversified investment option or a lifecycle option, depending on the fund. Your fund’s features and investment returns are explained in plain English and easy to read graphs on a ‘dashboard’ that is readily available online or in print form with your annual statement.
- Low cost. A bit like a basic home loan, you don’t pay for features you don’t need. There are restrictions on the type of fees you can be charged, and fees are restricted to the cost of providing a service.
- Easy to compare. MySuper fund dashboards follow a standard format so they can be easily compared. Be mindful, though, that single option funds should not be compared directly with lifecycle MySuper products.
Retail, industry and corporate funds can all offer MySuper accounts to members in accumulation phase (pre-retirement). However, MySuper funds can’t be defined benefit funds and they are not available as super pension accounts for retirees.
A little history
MySuper is relatively new to the super landscape. It began as part of the Stronger Super reforms introduced in 2011 by the Gillard Government to replace existing default super products.
Legislation was enacted in 2012 and since 1 January 2014 only funds offering a MySuper product have been eligible to receive default super contributions for new employees. These days, if you start a new job and don’t choose a super fund, your employer will put 9.5% of your salary into a MySuper account in your name. The account may be chosen by your employer or be part of an industry agreement.
One shortcoming of the new and old systems is that some people who have changed jobs may have ended up with money in two or more super accounts. It is estimated that one in three super accounts are unintended multiples because the super system has historically attached member accounts to the employer, not the employee. This is an issue raised by both the Productivity Commission and the Financial Services Royal Commission.
To remedy this situation, the government is proposing that super accounts should be ‘stapled’ to employees, so a new account is not started every time you change jobs. This was part of the Your Future, Your Super package announced in the October 2020 Budget and scheduled to start on 1 July 2021.
You can check and manage your super by creating a MyGov account if you don’t already have one at my.gov.au and link to the ATO. Go to the ‘Super’ tab and you can see all your super accounts, including any you may have lost track of. You can also consolidate them into an account of your choice.
The other big issue for MySuper is defaulting members into poorly performing funds.
As part of the Your Future, Your Super package, a new online comparison tool will rank MySuper funds by fees and returns. Funds that fail to meet annual performance tests will be required to inform members and persistent underperformers will be prevented from taking on new members. This is designed to give ‘teeth’ to an existing comparison tool created by the industry regulator, the Australian Prudential Regulation Authority (APRA).
APRA turns up the heat on underperforming funds
In December 2019, in an effort to shine a light on underperforming funds, APRA published a colour-coded ‘heatmap’. The heatmap compares 80+ MySuper funds on investment performance, fees and costs, and sustainability.
In the first 12 months following the heatmap’s publication, APRA reported that:
- 11 of the MySuper products that underperformed investment benchmarks exited the industry
- 71% of MySuper members (or 10 million members) are paying less in total fees and costs
- An estimated $408 million was saved in fees and costs.
As at June 2020, APRA found that 53% of funds were performing well while 9% were significantly underperforming. The remainder were products with some investment concerns.
APRA calculated that the difference in net returns between an outperforming fund and a laggard was 2.26% per year in the six years to June 2020. This may not seem like much, but for a member with an account balance of $50,000 in 2014, being in an underperforming fund would have left them $9,569 worse off than if they had been invested in an outperforming fund. By June 2020 their balance would have grown to $66,846, 14.3% lower than the $76,415 they could have had in an outperforming fund. Over a working life the difference in outcomes would be even more stark.
You can check your fund’s temperature on the MySuper Product Heatmap.
How do they work?
If you have a MySuper account and want to get better acquainted, the first thing to check is whether you are in a single diversified investment product or a lifecycle product. The two approaches can result in very different risk and return profiles, especially early and late in your working life.
The majority (roughly two thirds) of MySuper funds offer a single diversified product. This is usually a ‘balanced’ approach with around 70% invested in higher risk growth assets (shares and property) and 30% in lower risk defensive assets (cash and fixed interest). The risk/return profile remains at medium-high throughout your working life.
The remaining one third of MySuper accounts use a lifecycle or lifestage approach and automatically move your savings from growth investments when you are young to more defensive investments as you get closer to retirement. Most retail sector MySuper funds are lifecycle, but some industry funds also use this approach.
The mix of growth and defensive investments in lifecycle accounts is usually based on your age and the decade of your birth. For example, a typical investment mix might be the following:
- 85/15 (growth investments/defensive investments) for under 45s
- 75/25 for members aged 45–54
- 55/45 for those aged 55–64
- 40/60 for those 65 and older.
This results in a progressive reduction in risk and returns, from high for younger members to medium-high for those in mid-career and low for older members.
However, some big funds are beginning to refine their MySuper lifecycle approach on concerns that lumping people into decade cohorts is too broad. For example, super ratings group Chant West says QSuper takes account of a member’s account balance as well as their age. Sunsuper transfers small amounts from growth to defensive investments every month from age 55. And Australian Catholic Super changes its investment mix every year from age 40 to 70, beginning with a 90/10 split and ending with a 40/60 split.
The returns earned by MySuper products in the relatively short time they have been around indicate that simple does not mean you have to compromise on performance.
According to Chant West, the median return for MySuper Growth funds (72% growth assets) since January 2014 (when MySuper was introduced) to January 2021 was 7.6% per year after investment fees and tax. This is well above the average MyFund target return of CPI (a measure of inflation) plus 3.5% over rolling five-year periods. Inflation has averaged below 2% for much of that period.
MySuper dashboards are required to display in graph form, and explain in plain English, the fund’s target return, actual returns and level of investment risk.
Chant West also reports Lifecycle fund returns separately from diversified funds to make it easier to compare like with like. In the period from January 2014 to January 2021, median returns have been best for younger Lifecycle fund members with a higher exposure to growth investments. This is as you would expect during a period of strong share and property markets.
The median return for young members born in the 1970s, 1980s and 1990s over that period was 7.3% to 7.4% per year, compared with 5.1% per year for members born in the 1940s, who had more exposure to lower risk cash and fixed interest. However, it should be remembered that the lower risk weighting of older members will protect them if the market falls in the years leading into their retirement when there may not be time to make up for lost ground.
Fees and insurance
One of the guiding principles behind MySuper was the need for greater transparency, and this is particularly so where fees are involved.
MySuper funds are required to disclose all fees and those fees must be limited to the cost of providing a service. Fees are charged for administration, investment and other services such as switching funds or contribution splitting.
One of the main features of MySuper dashboards is that fees are added up and reported as a single dollar figure for a member with a $50,000 balance. This allows for an easy comparison of total fees across MySuper funds.
According to APRA, while fees and costs are trending downward, they have not gone far enough as high administration fees continue to erode retirement balances.
In the year to June 2020, a member with a $50,000 account balance in a high fee fund would have paid $374 per year in administration fees. This is 2.6 times more than the $145 per year they would have paid in a low administration fee fund.
MySuper funds are also required to offer a basic level of cover for life and TPD (Total and Permanent Disability) insurance for most, but not all members. Insurance is now ‘opt-in’ for members aged under 25 or with an account balance below $6,000 to avoid fees eroding their retirement savings and/or unnecessary cover. This change was part of the Putting Members’ Interests First legislation that came into effect on 1 April 2020.
How to compare MySuper funds
If you know which superannuation providers you are interested in, you can go directly to their websites and check their MySuper dashboard.
In addition to the APRA heatmap mentioned earlier, ASIC’s MoneySmart website allows you to search for and compare MySuper funds. You can search under type of fund, ranked by fees or returns.
When you compare MySuper funds, make sure you are checking like for like. For example, don’t compare the performance of a lifecycle fund with a single diversified investment fund. And when you check fees, drill down to see if services you need are covered.
List of all MySuper funds
|Fund name||MySuper product name||Fund ABN||Fund type||Public offer?||Lifecycle?|
|AMG Super||AMG MySuper||30099320583||Retail||Yes||No|
|ANZ Australian Staff Superannuation Scheme||ANZ Staff MySuper||83810127567||Corporate||No||No|
|AON Master Trust||Aon MySuper||68964712340||Retail||Yes||Yes|
|ASGARD Independence Plan Division Two||Asgard Employee MySuper||90194410365||Retail||Yes||Yes|
|Australia Post Superannuation Scheme||BALANCED||42045077895||Public Sector||No||No|
|Australian Catholic Superannuation and Retirement Fund||LifetimeOne||24680629023||Industry||Yes||Yes|
|Australian Defence Force Superannuation Scheme||ADF MySuper||90302247344||Public Sector||No||No|
|Australian Ethical Retail Superannuation Fund||Balanced (accumulation)||49633667743||Retail||Yes||No|
|Australian Meat Industry Superannuation Trust||AMIST MySuper||28342064803||Industry||Yes||No|
|AvSuper Fund||AvSuper Growth (MySuper)||84421446069||Public Sector||Yes||No|
|Aware Super||First State Super MySuper Lifecycle||53226460365||Public Sector||Yes||Yes|
|Aware Super||Growth (MySuper)||53226460365||Public Sector||Yes||No|
|Boc Gases Superannuation Fund||BOC MySuper||49620344668||Corporate||No||No|
|Building Unions Superannuation Scheme (Queensland)||BUSSQ MySuper||85571332201||Industry||Yes||No|
|Christian Super||My Ethical Super||66628776348||Industry||Yes||No|
|Club Plus Superannuation Scheme||Club Plus Super _ MySuper||95275115088||Industry||Yes||No|
|Colonial First State FirstChoice Superannuation Trust||Colonial First State FirstChoice Superannuation Trust||26458298557||Retail||Yes||Yes|
|Commonwealth Bank Group Super||Accumulate Plus Balanced||24248426878||Corporate||No||No|
|Commonwealth Essential Super||Commonwealth Essential Super||56601925435||Retail||Yes||Yes|
|CONSTRUCTION AND BUILDING UNIONS SUPERANNUATION FUND||Growth (Cbus MySuper)||75493363262||Industry||Yes||No|
|Energy Industries Superannuation Scheme-Pool A||Balanced (MySuper)||22277243559||Public Sector||Yes||No|
|First Super||First Super MySuper||56286625181||Industry||Yes||No|
|Goldman Sachs & JBWere Superannuation Fund||Goldman Sachs & JBWere Superannuation Fund_MySuper Product||55697537183||Corporate||No||No|
|Guild Retirement Fund||Guild Retirement Fund (MySuper)||22599554834||Retail||Yes||Yes|
|Health Employees Superannuation Trust Australia||Balanced Growth||64971749321||Industry||Yes||No|
|HOSTPLUS Superannuation Fund||Balanced option||68657495890||Industry||Yes||No|
|IAG & NRMA Superannuation Plan||MySuper||58244115920||Corporate||No||No|
|Incitec Pivot Employees Superannuation Fund||Active Balanced||68569795856||Retail||No||No|
|Intrust Super Fund||Intrust MySuper||65704511371||Industry||Yes||No|
|IOOF Portfolio Service Superannuation Fund||IOOF MySuper||70815369818||Retail||Yes||No|
|Labour Union Co-Operative Retirement Fund||MySuper Balanced||26382680883||Industry||Yes||No|
|LGIAsuper||LGIASuper MySuper Lifecycle||23053121564||Public Sector||Yes||Yes|
|Local Authorities Superannuation Fund||Vision MySuper||24496637884||Public Sector||Yes||No|
|Local Government Super||MySuper Age Based Investment Strategy||28901371321||Public Sector||Yes||Yes|
|Lutheran Super||Balanced Option_MySuper Compliant||93371348387||Corporate||No||No|
|Maritime Super||MYSUPER INVESTMENT OPTION||77455663441||Industry||Yes||Yes|
|Max Super Fund||Max Super Fund MySuper Plan||22508720840||Retail||Yes||No|
|Meat Industry Employees Superannuation Fund||MIESF MySuper||17317520544||Industry||No||No|
|Media Super||Balanced investment option (accumulation)||42574421650||Industry||Yes||No|
|Mercer Super Trust||Mercer Santos MySuper||19905422981||Retail||Yes||No|
|Mercer Super Trust||Mercer SmartPath||19905422981||Retail||Yes||Yes|
|Mercer Super Trust||Mercer Tailored (CRG) MySuper||19905422981||Retail||Yes||Yes|
|Mercer Super Trust||Mercer WGSP MySuper||19905422981||Retail||Yes||Yes|
|Mercer Super Trust||Virgin Money MySuper||19905422981||Retail||Yes||Yes|
|Mercy Super||MySuper Balanced||11789425178||Corporate||No||No|
|Mine Superannuation Fund||Default Lifecycle||16457520308||Industry||Yes||Yes|
|MLC Super Fund||MySuper||70732426024||Retail||Yes||Yes|
|MLC Super Fund||NAB Staff MySuper||70732426024||Retail||Yes||No|
|MTAA Superannuation Fund||My AutoSuper||74559365913||Industry||Yes||No|
|MyLifeMyMoney Superannuation Fund||MyCatholicSuper||50237896957||Industry||Yes||Yes|
|NESS Super||NESS MySuper||72229227691||Industry||Yes||No|
|NGS Super||Diversified (MySuper)||73549180515||Industry||Yes||No|
|Perpetual’s Select Superannuation Fund||Perpetual MySuper||51068260563||Retail||Yes||No|
|Public Sector Superannuation Accumulation Plan||PSSap MySuper Balanced||65127917725||Public Sector||No||No|
|Qantas Superannuation Plan||Glidepath||41272198829||Corporate||No||Yes|
|QSuper||QSuper Lifetime||60905115063||Public Sector||Yes||Yes|
|Retail Employees Superannuation Trust||REST Super||62653671394||Industry||Yes||No|
|Retirement Portfolio Service||ANZ Smart Choice Super for employers and their employees||61808189263||Retail||Yes||Yes|
|Retirement Portfolio Service||ANZ Smart Choice Super for QBE Management Services Pty Ltd and their employees||61808189263||Retail||Yes||Yes|
|Retirement Wrap||BT Super MySuper||39827542991||Retail||Yes||Yes|
|Retirement Wrap||Westpac Group Plan MySuper||39827542991||Retail||Yes||Yes|
|Russell Investments Master Trust||General Division||89384753567||Retail||Yes||Yes|
|Smartsave ‘Member’s Choice’ Superannuation Master Plan||SmartSave MySuper Balanced||43905581638||Retail||Yes||No|
|Statewide Superannuation Trust||Statewide MySuper||54145196298||Industry||Yes||No|
|Suncorp Master Trust||Suncorp Lifestage Funds||98350952022||Retail||Yes||Yes|
|Sunsuper Superannuation Fund||Sunsuper for Life||98503137921||Industry||Yes||Yes|
|Super Directions Fund||AFLPA & AFL Industry MySuper||78421957449||Retail||Yes||Yes|
|Super Directions Fund||AMP MySuper No.3||78421957449||Retail||Yes||Yes|
|Super Directions Fund||Brookfield Australia MySuper||78421957449||Retail||Yes||No|
|Super Directions Fund||CCA MySuper||78421957449||Retail||Yes||Yes|
|Super Directions Fund||Macquarie Group MySuper||78421957449||Retail||Yes||No|
|Super Directions Fund||Water Corporation MySuper||78421957449||Retail||Yes||Yes|
|Super Directions Fund||Woolworths Group MySuper||78421957449||Retail||Yes||No|
|Tasplan Superannuation Fund||Tasplan MySuper||14602032302||Industry||Yes||Yes|
|Telstra Superannuation Scheme||Telstra Super MySuper||85502108833||Corporate||Yes||Yes|
|The Bendigo Superannuation Plan||Bendigo MySuper||57526653420||Retail||Yes||Yes|
|The Victorian Independent Schools Superannuation Fund||VISSF Balanced Option (MySuper Product)||37024873660||Industry||No||No|
|Toyota Super||MySuper Growth||58208377062||Corporate||No||No|
|TWU Superannuation Fund||Balanced (MySuper)||77343563307||Industry||Yes||No|
|WA Local Government Superannuation Plan||My WA Super||18159499614||Public Sector||Yes||No|