29 . 10 . 18
By Ignatius Wilson
MySuper is the name for the superannuation fund product Julia Gillard’s government introduced in 2011, offering a simpler, cheaper super product for those who do not nominate a super fund to receive their compulsory employee contributions.
This is an important development as superannuation is a key component of retirement savings for people who work. However it is only since Paul Keating’s 1992 super reforms that super became a government-private citizen co-opted strategy for all employees; prior to this a 3% super contribution was made towards employees covered by awards only.
Straight away we can see the three central tenets of MySuper: simpler, so that those without an interest in finance are able to see what their money is doing; cheaper, so that members’ retirement savings aren’t eaten away by fees and charges; and that from trade unions superannuation developed, from blue collar workers covered by awards to every eligible worker in today’s economy.
MySuper is offered by a range of super funds either industry, operated not-for-profit; corporate, operated by the employer for their employees; or retail, offered by financial services providers to the general public.
APRA regulates and reports on MySuper. You can see the quarterly APRA scores from different funds here https://www.apra.gov.au/publications/quarterly-mysuper-statistics
All MySuper accounts are accumulation-style, as is the norm, rather than defined benefit. Insurance is also included at a minimum level for Life and TPD, total and permanent disability.
Life insurance typically pays an agreed value to the insured if they die while TPD typically pays an agreed value to the insured is unable to work in their original job due to an injury or accident.
These insurances can be opted out of. Many fund members have alternative insurance products or decide they do not require these insurances.
Fees are charged for a number of aspects of maintaining the fund including administration and buy-sell spreads. However, as with other super funds products, retail super funds charge higher fees than industry funds. This should be kept in mind as fees eat into your balance and can reduce real performance of your money to below-market returns!
MySuper also has to conform to one of two investment methodologies, the single investment approach and the lifecycle approach. The single investment approach is something we are probably all familiar with – balanced, growth, high-growth or defensive are the labels given to these approaches.
Balanced is the most common as it is considered a relatively low-risk way to achieve good returns over the course of decades, prior to your retirement.
The lifecycle approach simply actively managed your super holdings depending on your age, gender, salary and other factors to optimise returns on a more personalised level.
I hope this has offered some insight into the most common type of super fund product in Australia. Who runs your super fund? Do you own a MySuper account?