MySuper products are default superannuation products that employers pay your compulsory SG contributions into. But how does MySuper work?
A MySuper product can be a stand-alone product or it can be offered as a part of the choices contained in a regular super fund.
Default Superannuation Guarantee (SG) employer-paid contributions can only be paid into a MySuper product or a fund that has a MySuper option.
Many modern super funds offer members numerous choices of investment, insurance, advice and other services. The choices available are so extensive that there is almost nothing an investor could want that can't be found in a modern superannuation fund.
But what if you are one of the millions of Australians who, while you understand why superannuation is important, just want a simple no-nonsense super fund that won't force you to make decisions about investment and insurance options?
This is why the government in 2013 introduced MySuper, a system that allows superannuation funds to offer products that are much simpler than the main funds many members were used to dealing with. The essence of MySuper products is that they contain just one investment choice and a standard cover insurance arrangement rather than regular funds that offer dozens of investment and insurance choices.
MySuper products have other advantages too: as simpler products they should have lower fees. And as simpler products their Product Disclosure Statements should be simpler than those for regular funds. MySuper products simplify superannuation funds but they do not dumb it down. They will still offer financial advice which will be paid for by the fees the members already pay.
MySuper and super choice
Super choice has been operating in Australia since 2005, meaning that for many years now most employees have been free to choose which super fund they would like their employer-paid contributions sent to.
But because not all employees have a preferred super fund, employers are required to have in place a default super fund for employees who haven't made a fund choice or who aren't interested in making one.
These default funds are normally chosen by the employer, often in consultation with their employees, or they can use the fund endorsed by their employer industry association or nominated in the industrial awards that sets their employment terms and conditions.
Because many of the nation's employees who use their employer's default super fund keep most of their superannuation in the fund's default investment option, the government has integrated MySuper into these workplace arrangements by stipulating that only MySuper products will be allowed to be default super funds that can accept superannuation guarantee contributions.
In practice, this means super funds and wealth management groups that wish to compete in the workplace default superannuation market need to apply to the superannuation regulator, the Australian Prudential Regulation Authority (APRA), for authorisation to offer MySuper products.
MySuper is we now call the default super product your employer uses for compulsory superannuation contributions. They are simplified superannuation products containing:
just one investment choice;
one standard insurance arrangement.
As simpler super products they usually have lower fees and are easier to compare.
MySuper in practice
For the majority of employers and employees who use their default super fund's default investment option and who have that fund's standard insurance cover, MySuper will not impact them much at all. They will simply become a member of that fund's MySuper option - which in most cases was the default investment option they were already using anyway.
All the usual provisions of super fund choice also apply, so employees who are no happy with the MySuper product chosen by their employer can choose another fund. The only condition is that the employee needs to already be a member of that fund or MySuper product and that the fund can accept contributions from their employer.
Similarly, because MySuper products are in most cases a specially designated investment option within a regular super fund they can also have their balance spread across the MySuper option and other investment options offered by the same super fund.
In these cases members will still receive a single annual account statement from their super fund each year. If they have money only in the MySuper product, the annual member statement and member information they receive will be simpler because it will only need to describe the MySuper product.
MySuper products are diversified investment products, i.e., have their investments spread across several asset classes such as shares, bonds, property, cash and 'alternatives' such as hedge funds, private equity and infrastructure. Most MySuper options are weighted in favour of growth assets being shares and property, meaning they are expected to earn good long term rates of return.
ISA, Grattan find common ground11 August 2020, 11:58amIndustry Super Australia has found some common ground with the Grattan Institute in regards to its report on the effects of the government's Early Release of Super (ERS) scheme. Read more
ERS doesn't justify higher SG: Grattan10 August 2020, 11:53amNew modelling from Grattan Institute found most Australians will have a comfortable retirement even if they have taken advantage of the government's early release scheme. Read more
MySuper returns negative7 August 2020, 12:15pmDefault MySuper products delivered negative returns in the 2019/2020 financial year, but the results weren't as bad as they could have been. Read more