Are MySuper options really safer than choice?
MySuper may have been introduced as a low-cost option for disengaged members but, according to new research, it has emerged as a much better bet than most so-called “choice funds”.
According to research commissioned by the Australian Institute of Superannuation Trustees (AIST) and carried out by actuarial research house, Rice Warner, if all members of Australian Prudential Regulation Authority (APRA)-regulated funds had fees and returns consistent with the average MySuper product, super assets would be $52.5 billion higher in (today’s dollars) in a decade’s time.
The research – which used past performance data of both sectors to forecast retirement outcomes in a decade’s time by 2027 – suggests that individual members who remain in underperforming Choice products could be as much as $50,000 worse off at retirement compared with those who invest their super in a MySuper fund.
Commenting on the research results, AIST chief executive, Eva Scheerlinck said the findings were timely given the damning evidence out of the Royal Commission about bank and insurance super funds, where most members were in poorly performing funds outside of the more highly-regulated MySuper sector.
“The time has come for every Australian to carefully examine their super and consider the long-term benefits of investing in a good value, high-performing, not-for-profit MySuper fund,” Scheerlinck said.
“While investing in more defensive assets might be a valid reason to choose product other than MySuper, the Royal Commission has shown us that many people who choose their super fund end up in poor-performing bank-owned super funds because of conflicted financial advice,” she said.
Rice Warner chief executive, Michael Rice said the results suggested those who made a choice to invest their super outside of the MySuper sector were likely to experience a worse outcome.
“There is a general view that members who choose to invest their super outside MySuper products should achieve a better outcome as they are tailoring their investment decisions to their personal circumstances and financial goals,” Rice said.
“However, our research shows that well-managed MySuper products with low fees are likely to deliver better outcomes for members over the long run.”
Recommended for you
Financial Services Council chief executive, Blake Briggs, is urging Minister for Financial Services, Stephen Jones, to take advantage of the QAR opportunity to reduce regulatory duplication and ensure advice is affordable.
Former chair of the House of Representatives’ Standing Economics Committee, Tim Wilson, is planning a return to politics after losing his seat in the 2022 federal election.
Morningstar is going to offer research ratings of funds in the $3.5 trillion superannuation sector for the first time in response to demand from financial advisers.
Treasurer Jim Chalmers has opened a consultation into the design of the annual superannuation performance test, canvassing views on a range of reform options.
