The challenge for anyone choosing a MySuper product or super fund, whether you are an employer, employee or an individual looking for a personal superannuation product, is to find one that suits you.
This is because not all products and funds are the same 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 returns for the most reasonable fees, and which have the best insurance deals.
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. That is, 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 smart 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 to 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. Y
ou should also look at the total fees your fund charges noting that anything above 1% 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 into things like renewable energy this is especially important for you to know.
Other investment questions to ask are: can you choose indexed investments, ethically managed investments, and an age-based lifecycle strategy? Several super funds also provide discounted access to health insurance so you should check whether your fund does as well.
|HOW TO COMPARE INVESTMENT RETURNS
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 public sector 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 qualify as industry funds.
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 investment choices. In contrast, products or funds you join through an intermediary usually offer lots of investment and insurance choices which reinforces why their fees are higher.
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-for-profit', meaning their fees generally match their costs because 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 Money we take a more nuanced view. This is because you should always compare funds' investment returns, choices, fees, insurance and extra features. Being not-for-profit doesn't make the fund better, it just explains its background and where it came from.
You are now ready to work through The Good Super Guide fund comparison table.
|ARE YOU PAYING TOO MUCH IN SUPER FEES?
If your super fund or product is charging more than 1.0% per annum in fees then it should be providing lots of choices, adviser support, great online account access and extra services. If it isn't then you should ask them why.
|Features to look for|
|Who runs the fund or product|
|Is it clear who runs the fund or product?||Yes / No|
|Who is the company or sponsoring entity?|
|Do I recognise them and their brand?||Yes / No|
|Can I join online?||Yes / No|
|How do I rate the online account access?||Good / Okay / Poor|
|How many investment choices does it offer?|
|Do I understand how my money will be invested?||Yes / No|
|How good is the flagship investment choice over five years?|
|Can I choose investment strategies?||Yes / No|
|Can I choose specific investment managers?||Yes / No|
|Are underlying shareholdings disclosed?||Yes / No|
|Can I choose indexed investments?||Yes / No|
|Can I invest in 'ethical' or ESG choices?||Yes / No|
|Can I choose an age-based (life stage) strategy?||Yes / No|
|Can I choose my own direct investments?||Yes / No|
|How much insurance cover do I get as standard?|
|How much will death and TPD insurance cost?||$ per week|
|How much will income protection cost?||$ per week|
|Can I top-up my insurance?||Yes / No|
|If I don't want insurance can I turn it off?||Yes / No|
|How much will I pay in total fees?||%pa|
|Does it come with the support of a financial adviser?||Yes / No|
|What loyalty discounts are included?|
|Can I get discounted health insurance?||Yes / No|
|Does your fund have a smartphone or tablet app?||Yes / No|
|Are there a good range of other extra features?||Yes / No|
|How super choice works||A beginner's guide to lifecycle superannuation products|