Australian super fund returns for Calendar Year 2023 were robust, with an average 9.6% return reported for balanced funds.
But not all super funds deliver in the same way.
And somewhat ironically, the category called ‘Choice’ funds has been called out for poor performance by the regulator. These funds hold $1.1 trillion in super savings across 7.5 million member accounts.
In a news release on 21 February, the Australian Securities and Investments Commission (ASIC) highlighted a risk to retirement outcomes for Australians who may be holding their superannuation in persistently underperforming options.
The ASIC review found that often there was ‘insufficient emphasis on and a lack of transparency about Choice investment options that failed to meet performance expectations. There was (also) little evidence of trustees communicating to members about investment option performance in a targeted manner, and financial advisers were not always addressing underperformance where relevant.’
‘Members should be informed about their super investments – not left in the dark if their super investments are not performing as expected, and there may be better alternatives,’ ASIC commissioner, Simone Constant said.
Specifically, ASIC called upon more industry focus on ensuring fund members are achieving good investment outcomes that ultimately support stronger outcomes in retirement. The report on Choice products is part of that requirement, Ms Constant noted.
What are Choice super funds?
How do they differ from MySuper funds?
Australian super contributions are typically either paid into a MySuper fund option or a Choice fund. The MySuper funds are offered by most major funds. They are a simple, low-fee option which is a default fund your employer can use if you do not select an alternative. Anyone can move funds to a MySuper fund.
The Choice funds allow super fund members to invest in specific types of investment mixes, which may be heavy or light on shares or property or cash, or may favour different investment profiles such as international investments or ethical investments. Choice funds are those funds you actively choose as opposed to a MySuper default fund.
What does this mean exactly?
Do you need to take action?
The short answer is that this should concern you, because if you have a sub-standard performing fund, this could lead to a substandard retirement outcome.
What do you need to do to ensure your super is working in an optimal fashion?
It’s useful to view this ASIC report as a helpful trigger to better understand the basics of your super investments. See if you can answer the following questions?
Are you in a MySuper or a Choice fund?
How is your fund performing (earnings) compared to other funds, both industry and retail?
Have you recently checked your super investment settings? Do you know if you are invested in a balanced, growth or another type of setting? And what type of investment best meets both your goals in retirement and your own personal risk tolerance.
Difference between performance and returns
If you have concerns that your fund or investment option is underperforming, it’s a good idea to contact the fund directly and talk to them about this performance. Ask for more information about why they believe you are in the most appropriate option for your needs and circumstances. It’s worth remembering that returns (net percentage increase on money invested) are not the only important factor. Product offerings and other services are particularly important considerations in retirement. Fees also vary, so it helps to know how much your super investment is actually costing as well as earning!
Learn more about super
It’s never too late to step through the basics, review your current balance and returns and project how this will last across your retirement years. You can do this in a guided consultation with our experienced advisers. In the words of ASIC, it’s time to take charge to ensure a stronger retirement outcome.
Hi
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What cost to move over from AMP.
Are there any human beings available to call me and explain?
Hi Bob, the robots have not risen up and taken over just yet but this is something you need to discuss with whichever fund you intend to move your money to and also AMP. Our advice team can help with understanding the benefits accumulation vs pension accounts and how long your super might last you but in order to keep our fees as low as possible we do not compare specific super funds against one another.
Which fund is getting/giving this amount?
“Australian super fund returns for Calendar Year 2023 were robust, with an average 9.6% return reported for balanced funds”
I just did my math with Australian Super all my super is in “balanced funds”
For financial year 2023, it did not get anywhere near 9.6%. So which find out there claims 9.6%?
As for the others making no money they should all be named and shamed so we can go to more reputable Financial Institutions.
Living on a pension is hard enough with governments against us surviving, without super funds ripping us off too.
Funny you should say that looking at published ETF returns over 3&5 years are way more than my investment in them show.
Every APRA regulated super fund will publish investment return information in their Product Disclosure Statement (PDS). This comes in two forms i.e. “target” future returns and actual historical returns.
It is most informative to see that in almost every case the returns on the Balanced or Default investment option are lower (and often significantly lower) than the returns on options with higher exposure to growth assets such as shares. This applies to both the targeted future returns and actual 10 year historical returns published in the PDS.
For those funds offering “indexed” shares options, the fees for these options are also a fraction of the fees for the Balanced or Default option.
Whilst options with higher returns (e.g. indexed shares) are likely to be more volatile (that’s a fact of investment life) one has to question the relevance of market volatility over a long term investment (say 10-20 years).
The key is to find the right trade off between return and volatility whilst minmising fees for each individual. It is common for a retiree to have some money invested in Cash for short term needs and some in higher returning (and potentially significantly lower fee) options to provide long term growth.
Which are the best choice funds for a retiree to invest in
Hi Noel, we’d be happy to help you better understand your options and make a more informed decision on your super, the best way to do so would be via one of our Understanding More About Super consultations.
I am still in contribution stage ( working full time) and I use a spreadsheet to TRY and work out what the returns I actually receive on my the super investments with my “non for profit” fund. It is very difficult and rarely is anywhere near the returns the fund publishes. I think the super industry intentionally keeps things complex to keep us investors guessing and “in the dark”.