Kicking the tyres of a MySuper product or super fund is not difficult if you know how.
Not all super funds are the same as they can offer different features best suited for particular types of members.
Comparing super funds feature by feature will help you decide which fund is best for you.
Investment returns, insurance premium prices and fees are the most important features to compare.
Employers can pay members' default contributions only into a MySuper product or a super fund that contains a MySuper option.
The challenge for anyone choosing a MySuper product or super fund, be they an employer, employee or an individual looking for a personal superannuation product, is to find one that suits them.
This is because not all products and funds are alike as they are designed to serve the needs of different types of members. For example, some are aimed at people who want simple low cost super, some are aimed at people who want lots of choices and some are aimed at people who want direct access to their own investments.
To sort out which superannuation funds and products will suit you the challenge is to figure out what they offer, what features you like, which are likely to deliver you the best investment outcomes for the most reasonable fees, and which have the best insurance deal for your needs.
Recall that your superannuation account is really not that different to any other savings account you have except that your superannuation account is one you will have your whole working life and probably throughout your retirement, i.e., a young person joining the workforce this year could be a member of that product or fund for up to 70 years.
What makes a superannuation account different is its purpose; you are not saving for day to day expenses or even a car or a holiday, but for your retirement. Its primary purpose is building up a large enough account balance to fund your retirement income.
Super funds and products achieve this by making smart investment decisions, either themselves or in consultation with their own advisers, and by utilising the services of quality investment managers who then invest the fund's money on behalf of the members to earn good rates of return. The icing on the cake is that along the way they may also give great online account access, good deals on insurance, access to other investment products and banking services, financial advice and even shopping discounts.
What features to compare?
A good way to understand any super fund is to look at it as a collection of features centred around investments, insurance and account access. When you do this you will realise the way to compare any super fund is to look at its investment choices, their investment return track records, fees, insurance packages and other features like their online account access, availability of good quality financial advice through the fund and whether it offers other financial products like banking, loans, credit cards or savings plans.
Comparing investment options may seem daunting but all you need do is check whether the investment returns from the main options are above or below average over the medium term, say three, five or 10 years. You should also look at the total fees your fund charges noting that anything above 1.3% is now considered highly priced. And then you should find out what types of insurance packages are available and what they cost.
If you want direct control over your investments you should also check whether you're able to invest directly into particular companies listed on the ASX and also Exchange Traded Funds, Listed Investment Companies or cash Term Deposits.
Good super funds and products are also transparent and open about how they invest your money, which means they provide clear information describing the investment managers they use and what underlying shares and debt securities they invest in - this last aspect is called portfolio holdings disclosure. If you want your superannuation invested ethically this is especially important for you to know.
Other investment questions to ask are whether you can choose indexed investments, can you choose ethically managed investments, and can you choose an age-based lifestage strategy? Several super funds also provide discounted access to health insurance so you should check whether your fund does as well.
You can't join every MySuper product or super fund
When you start looking for a MySuper product or super fund to join, you will quickly realise you can't join every product or fund because not all are open to
every employer, every employee or the general public. For example, it may be open to only government employees or an in-house corporate fund will only be open to employees of that company.
As a result, for most people this means you will really be choosing between MySuper products and super funds offered by corporate or personal master
trust operators or by industry funds. Note that some public offer public sector funds now also qualify as industry funds.
You will recall from other articles in this Good Super Guide that industry funds are funds set up to provide superannuation to people who work in a common industry. They are usually operated jointly by employer associations and unions closely associated with that industry. Retail funds, on the other hand, are super funds operated by commercial players such as banks, life insurers or financial advice groups.
But are industry funds and retail funds really that different once you strip off the top layers of who runs them? This is a much harder question than it seems because some industry funds now offer almost as many features as retail funds and some retail funds also offer simplified cut down versions of themselves that very closely resemble traditional industry funds.
The key point is that while a super fund or MySuper product's market segment or label is helpful in understanding how a fund thinks and where it came from, it doesn't actually tell you very much about what the fund does or if it's any good - which is why SelectingSuper emphasises looking inside the product or the fund and comparing their features
Direct or through a financial adviser?
A good way to understand your MySuper product or super fund is to look at how you can join it. For example, can you join it directly over the internet, do you have to join through your employer, or do you have to go through an intermediary such as a financial adviser?
This matters because products or funds you can join directly are usually cheaper because they tend to be simpler with fewer features. In contrast, products or funds you join through an intermediary necessarily require a higher fee to cover the cost of their services.
These intermediated funds also usually offer lots of investment and insurance choices, reinforcing why their fees are higher as well. Conversely, this means if you want extra features like bundled support from a financial adviser or lots of investment choices, you should expect to pay higher fees.
It works the other way too. Some super funds or products charge quite high fees even though what they are offering is very simple
Is not-for-profit better?
Industry funds often describe themselves as 'not-forprofit', meaning their fees generally match their costs as they do not need to make a profit for any shareholders. Retail funds, i.e., master trusts, on the other hand, because they are operated by commercial entities must try to make a profit and so they have to charge fees that are more than their costs.
But while being not-for-profit sounds noble, the hard-nosed question is whether being not-for-profit makes a fund better, or does it just make it different?
At SelectingSuper we take a more nuanced view because you should always compare funds' investment returns, choices, fees, insurance and extra features.
You are now ready to work through the SelectingSuper super fund comparison table.
Feature to look for
Who runs the fund or product?
Is it clear who runs the fund or product
Name the company or sponsoring entity
Do I recognise them and their brand
Can I join online
How do I rate the online account access
Good / Okay / Poor
How many investment choices are available
Do I understand how my money will be invested
How good is the flagship investment choice over 5 years
Super funds could boost returns by 59bps: Report12 November 2019, 11:48amSuperannuation funds considering a merger or major investment portfolio changes should implement a program to manage tax costs and transaction costs to deliver meaningful benefits to funds and their members ... Read more
Retail funds shrink unlisted assets11 November 2019, 12:40pmSuperannuation funds now have close to $240 billion in unlisted assets, but retail funds have a smaller proportion of their assets allocated to them than five years ago. Read more
Legal fight could change super game8 November 2019, 12:15pmRest, the $57 billion industry fund, continues to battle a legal fight brought by one of its members that could have consequences for the entire superannuation industry. Read more
APRA begins super data transformation efforts8 November 2019, 11:21amAPRA is embarking on a multi-year project to improve the quality of its superannuation data collection that will pave the way for the proper comparison of super products, with choice super set to come ... Read more
Actuaries develop retiree rule of thumb7 November 2019, 12:37pmA group of actuaries have answered the calls of retirees looking for a simpler way to determine how much money they should draw out of their savings in retirement, developing a new three-part rule of ... Read more