Seven tips to better manage your super
Are your super savings parked in a MySuper account with an underperforming super fund? Consider these seven easy steps to sort out your super savings.
Now is the right time to sort out your super
A new year is the perfect time to attend to long-put-off jobs, and to set yourself up for the year to come. So why not get set for a better retirement too?
Can’t I just leave my super as is?
You can, but if you’re in a high fee, underperforming fund, your super balance at retirement could be much lower than it might be if you take more considered action.
1 million Australians are with underperforming super funds
In August 2021, the Australian Prudential Regulation Authority (APRA) released the findings of the first-ever MySuper Product Performance Test. Approximately 14 million Australians have superannuation in MySuper accounts, with combined total assets of $900bn.1
Of 76 MySuper products tested against an objective benchmark, 13 failed. That’s approximately 1 million members in underperforming funds ($56bn in total assets).2 Funds whose MySuper product failed APRA’s Performance Test must write to impacted members and advise them to consider moving their funds to a better performing product. You may have received a letter like this, if your super was with an underperforming fund.
See the results of the MySuper Product Performance Test on the APRA website.
7 steps to sort out your super
Whether you’re with an underperforming MySuper fund or not, consider following these steps to ensure your super savings are in the best possible place for now.
- 1. Find out where your super is
- 2. Ask yourself whether your default MySuper product is right for you
- 3. Examine your current super product
- 4. Match your investment option to your circumstances, retirement goals, and appetite to risk
- 5. Combine your super
- 6. Question all fees
- 7. Make your super sustainable
1. Find out where your super is
It’s vital to have a clear picture of where your super is.
To see all your reported and closed super accounts linked to your tax file number, go to the myGov website, link your myGov account to the ATO, and select the ‘Super’ tab.
If you find multiple reported accounts listed, you can combine them. See step 5. Now combine your super.
2. Ask yourself whether your default MySuper product is right for you
If you’re with a MySuper product, it might be time to ask yourself, why?
A MySuper product is the default option you’re placed in if you don’t specify how you want to invest your super when you start membership at a fund.
Many funds offer MySuper products that each have their own unique asset allocations, risk profiles, and investment performance. You can check if your account is a MySuper product via the ATO website.
MySuper products protect your super savings until you choose a preferred investment option for your super. You may be one of the many people in a default MySuper product that’s underperforming. That’s why doing a bit of research is important, so that you understand whether sticking with a MySuper product or going with a ‘choice’ product (one you pick for yourself) is right for you.
Positives and negatives of MySuper products
Some MySuper products show solid performance over a long period of time. For example, UniSuper’s Balanced investment option (a MySuper product) has shown average returns of 9.34% p.a. over 10 years to 30 June 2021, with returns of 17.40% for 2021 so far.3
With good returns, a member might feel comfortable leaving their super as is, however it’s worth investigating other investment options at the same or other super funds, as they may offer higher returns. (For example, UniSuper’s choice product, its Sustainable High Growth option provided higher average returns of 12.20% p.a. over 7 years.4)
With underperforming MySuper products, some of which offer disappointing average returns around 3.5% p.a., you may have limited investment earnings and pay high fees.
Remember, your super is your income when you retire, so it’s always good to keep an eye on your default MySuper product. It’s important to explore other options with the aim of optimising your retirement savings.
3. Examine your current super product
To get on top of your super, take a close look at the product you’re with.
- What is its performance over the long term (usually a 7-10 year span)? Has it performed well on average, or poorly, when compared to other products?
- Look at fees and insurance. Are the fees higher than what you may find elsewhere? Are you paying for services you don’t need? Is the insurance cover relevant to you and appropriate for your current circumstances?
Explore UniSuper’s Pre-Mixed and Sector options.
Compare your super with others
To see how your super option compares with other products in the market, use the YourSuper comparison tool on the ATO website. It includes a table of MySuper funds ranked by fees and net returns, and you can even compare multiple MySuper products at the same time.
If you’re not in a MySuper product or want to compare choice products, you’ll need to use other online comparison websites (there’s a list at moneysmart.gov.au).
It’s also a good idea to do your own comparisons by looking up various products on offer on fund websites and by also reading their product disclosure statements (PDS) and target market determinations (TMD) for their products.
4. Match your investment option to your circumstances, retirement goals, and appetite to risk
What you need in a super fund will vary according to your circumstances, goals and attitude to risk.
If you’re starting your career and expect many more years in the workforce, you may be more willing to take on more investment risk, as you have time to recover from losses. Mid-career, a careful approach may work best, and you may diversify your investments between low and high risk options. Late-career or approaching retirement, you’re unlikely to recover if investments decline in value, so you may focus on lower risk options.
When deciding on which fund you trust with your super, consider how you envisage your working life and retirement to be. Do you plan career breaks? Do you want to retire early? What level of financial comfort do you expect in retirement? All these factors should influence how you invest super.
Appetite to risk
Your appetite for risk and the amount of time you expect to invest, play important roles in how you select your super investment options. This links back to your circumstances.
With a long working life ahead of you, your final super balance will be less affected by short term risks and market volatility. You’ll have more time to ride out the variability of short-term returns. On the other hand, if you hope for high returns, you’ll generally need to accept higher levels of risk. (For risk and return profiles for UniSuper’s investment options, see our Investment Guide.)
Get financial advice
A financial advisor can help you examine different fund options in relation to your financial goals. It’s worth speaking with one if you aren’t sure what direction to head in.
5. Combine your super
Once you’ve determined which super product you want, consider combining multiple accounts if you have them. This ensures you pay for only one set of administration fees and insurance premiums.
Multiple super funds and their impacts
In 2018, the Productivity Commission found over one-third of super accounts are unintended multiples. Over time, fees erode a retirement balance, leaving a typical full-time worker 6% worse off at retirement (or $51,000).6
As part of government reforms, new ‘super stapling’ rules have been introduced to reduce the likelihood of multiple accounts. Now, when you start a job and don't nominate a super fund, your new employer must request your ‘stapled’ super fund details from the ATO, and pay to your stapled fund.7
Note, you may find yourself ‘stapled’ to an underperforming fund if you don’t actively choose your fund.
How to combine super
Before combining your super, consider the possible effects this might have on things like the fees you pay, the amount of cover and conditions of your insurance and the tax on your super. There could be other effects too, so it’s best to seek financial advice if you’re unsure.
6. Question all fees
Examine the need for any fee you’re charged (for info on fee types, see Canstar’s super fees explained page). If you’re not sure if you need a service, question it with your super fund. Once you’re in the know, you can make a decision on whether to reduce services, or move fund options altogether.
In general terms, an account with low fees and high returns is ideal, but there are a couple of things to note:
- An account with high fees may bring high investment returns, and therefore the fee may be reasonable. High fees mixed with low returns, leave you with poor performance.
- High fees do not necessarily equate to higher investment returns. Some low fee products bring high returns, and vice versa.
7. Make your super sustainable
Consider the impact your investments make on the environment and society. There are now 57 ESG (Environmental, Social, and Corporate Governance) super funds in Australia, managing 1.6 trillion in investments8, so there’s every opportunity to choose an investment option that aligns with the causes you care about.
Check if your fund offers a sustainable investment option/s, and examine its ESG credentials when reviewing if it’s the right fund for you. Take a look at UniSuper’s Sustainable Balanced and Sustainable High Growth options.
The steps above will help get your super in the best possible place for you, right now, but they’re not the only steps.
We recommend you keep an active eye in your super, regularly check the performance of your fund, read your statements, and make additional pre or post-tax contributions, to grow your super when you can.
Things you need to know
Consider the PDS and TMD on our website and your circumstances before making decisions, because we haven’t.
1 Your Future, Your Super Performance Test, apra.gov.au.
2 Quoted results taken from 31 Dec 2021 Media Release ‘APRA releases inaugural Your Future, Your Super Performance Test Results’.
3 Past performance is not an indicator of future performance.
4 Past performance is not an indicator of future performance.
5 UniSuper Advice is operated by UniSuper Management Pty Ltd ABN 91 006 961 799 (USM), which is licensed to provide financial product advice. USM is also the administrator of the fund UniSuper ABN 91 385 943 850 (UniSuper). UniSuper Limited ABN 54 006 027 121 is the trustee of UniSuper.
6 6 June 2018 speech by then Deputy Chair of the Productivity Commission, Karen Chester, presented to the McKell Institute Executive Policy Forum.
7 Stapled super funds, ato.gov.au.
8 Rainmaker Information (21 April 2021) Australia's ESG superannuation funds (media release) 21 April 2021 media release of the results of the inaugural ESG Superannuation Taxonomy Study as part of its latest Superannuation Benchmarking Report.