What to look for when comparing MySuper funds

When comparing super funds, it’s often hard to know all the things you should consider. Performance and fees are two obvious metrics, but there are other considerations that may also be just as important. 

A MySuper fund acts as a default account if you don’t choose your own super fund when starting a new job.

1. Super comparison tools and websites don’t always give the full picture

Comparison websites and tools can give you a baseline comparison of super funds, and there’s a handful on the web that can help you on your super comparison journey. 

However, while useful, they can be limited in what they compare, for example:

  • If you’re using the Australian Tax Office (ATO)’s YourSuper comparison tool, you’ll be able to compare up to 80 different MySuper (default) funds against two specific metrics – investment returns and total fees. 
  • It’s unlikely that any comparison tool (including the ATO’s) includes any discounted fees, for example those you might receive via an Employer Plan, meaning performance net of fees is difficult to compare. So, if you’re in an Employer Plan, it’s worth checking to see if you’re receiving any employee discounts on administration fees. 
  • If you’re looking at other comparison sites, check that any performance figures and fees are calculated using the Australian Prudential Regulation Authority (APRA) reporting standards so that you know you’re comparing like-for-like.

2. The investment strategy will have an impact on investment performance

The performance of your super fund can help your account balance grow. However, not all MySuper funds have the same investment strategy. Common investment strategies include balanced, growth, defensive, ethical, conservative, life cycle or lifestage, and it's important to understand how different investment strategies impact performance:

Different investment strategies have different performance because of what they’re invested in

Generally speaking, growth investments (like shares, property etc.) have higher levels of risk but are likely to outperform defensive investments (such as cash, fixed interest etc.) over the longer term. 

Many MySuper funds have a single, one-size-fits-all, ‘balanced’ or ‘growth’ investment option that has around 60-80% invested in growth assets. Whereas other MySuper life cycle or lifestage funds apply an age-appropriate exposure to risk which changes (by decreasing the amount you have invested in riskier investments) as you approach retirement.

Because of this important difference, it’s worth understanding that the underlying investment strategies for MySuper funds aren’t always the same, and therefore it is difficult to compare performance.

Headline returns are not the same as personal rates of return

If you’re comparing headline performance rates, it’s important to note that your own personalised rate of return is likely to be different to the ones that are advertised, as it is based on your circumstances such as how long you’ve been in a fund, the amount and timing of insurance premiums, the nature and timing of contributions, any withdrawals that have been made, and if you have any discounts applied, e.g., employer plan discounts.

Past performance is not a strong indicator of future performance

Short-term market movements can impact the performance of a fund (such as the Global Financial Crisis in 2008, and COVID-19 in 2020). However, these movements are usually short-lived and aren’t necessarily an indicator of long-term performance.

It’s important to consider if strong short-term performance is the result of higher levels of risk taking or market timing.

3. Reputation and expertise

Many people prefer not to manage their super themselves, but opt for a super fund with deep investment expertise, and a reputation to earn long-term results for their members.

Some things to look for include:

  • The member service you receive, and whether there’s expertise in-house
  • How long has the fund been around, and is its reputation credible?
  • How many members does the fund service?
  • What is the value of the Funds Under Management (FUM)?
  • Does the fund manage your investment differently as you approach retirement or is there only a ‘one-size-fits-all’ for all members regardless of age?

4. Do you have an Employer Plan? This can have multiple benefits beyond performance

If you have your super through your employer, your fees may be discounted, which can have a direct flow through to the net investment return of your super. 

In addition, many super funds will offer employer plan insurance, which may be significantly cheaper than personal insurance, and in some instances, the employer may pay for their employees’ insurance premiums. 

And finally, many employer plans will offer lifestyle and wellness benefits and discounts with retailers that you cannot access otherwise, that could save you money in all aspects of your life.

5. Take a look at what you’re getting in return for the fees you pay

Super funds charge investment fees to manage your investments (generally as a percentage of your balance) and administration fees which cover costs such as call centres, administering your super account, and communicating regulatory or product updates.*

Some funds may also charge a performance fee if they exceed their performance target, or something called a buy-sell fee, or investment switching fee when you change your investment options. 

* If your super balance is less than $6,000, both your investment and administration fees will be capped at 3% of your total super account balance per year.

6. Every insurer is also different, and offers different insurance benefits

Each MySuper fund must offer minimum life insurance to its members over the age of 25 years, which helps provide a sum of money in the case of your illness, total and permanent disablement, or death. 

Often super funds will outsource the life insurance component of super to an external insurer, so explore the insurer’s claims payout rate, any definitions or exclusions, its underwriting process (if you need or want to apply for more that the default amount), and the premiums charged.

If you’ve been underwritten for insurance, when you’re comparing super funds, it is important to see whether the terms of your insurance cover can be easily transferred.

Note: There are certain requirements that super accounts need to meet in order to retain their insurance cover, such as not having more than 16 consecutive months without a contribution received rollover or rollover made into the account. If not, a super account will be ‘inactive’. Aside from making a contribution or rollover, members may ‘opt in’ to retain their insurance cover.

7. How easily can you interact with your super?

If it’s important to you, you may want to ask yourself how easy it is to engage with your super, and consider:

  • How user-friendly is the online experience, and how easy is it to navigate, use and make changes?
  • How often does your super fund communicate with you to help you understand and engage better with super?

Key points

  • There aren’t many super funds that offer exactly the same features, making it hard to compare like-for-like.

  • Performance is only one lens to look through when comparing super funds, and it has multiple facets.

  • The design of your super product can factor in your risk appetite, preferred investment options, and how close you are to retirement.

  • The life insurer, its rate of claims payouts, and its offerings are equally important as superannuation returns.

  • It’s important to do your own research to familiarise yourself with the features of each fund that you’re comparing against.

You might also be interested in

MySuper offers members a simple, cost-effective super solution that allows easy comparison of MySuper funds. We adjust our BT MySuper investment options for you over time.
The design of your underlying super product, and how it helps your investment performance.

1 Superannuation Statistics March 2021, The Association of Superannuation Funds of Australia (ASFA)

Last updated July 2021. A PDS is available for the superannuation products with a MySuper investment option and can be obtained by calling 132 135 or visiting the disclosure documents page. You should obtain and consider the PDS or other disclosure document before deciding whether to acquire, continue to hold or dispose of the superannuation product.

Superannuation is a long-term investment. Generally, contributions to a superannuation fund are preserved. The government has placed restrictions on when you can access your preserved benefits. In general, benefits will not be able to be paid until a member is age 65, or has permanently retired and is above his/ her preservation age (i.e. 55 years up to 60 years depending on when the member was born). 

The Government has set caps on the amount of money you can add to superannuation each year on a concessionally taxed basis. Contributions that exceed your contributions caps may have additional tax applied to them. The contributions caps change from time to time. Up to date information is available on the ATO website at ato.gov.au

Before requesting a rollover, you should consider where your future employer contributions will be paid (if your employer contributions are currently being paid to another fund) and check with your other fund(s) to determine whether there are any exit or withdrawal fees for moving your benefit, or other loss of benefits (e.g. insurance cover), noting that you may not receive the same type or level of benefits after the rollover. You may not be covered for injuries or illnesses that have arisen since you took out previous insurance, and you may lose loyalty benefits.