Choice super funds poor performance

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.