A Government initiative to provide a low-cost and no-frills product for employers.
Many super funds now offer a new, simple and cost-effective super account called MySuper. MySuper is a government initiative to provide simple super products for employers to choose as their default fund.
MySuper options have basic features and fee structures allowing members to compare funds easily based on cost, investment performance and insurance.
The features of MySuper
MySuper accounts offer:
- Lower fees (and restrictions on the type of fees you can be charged).
- Simple features so you don’t pay for services you don’t need.
- A single diversified investment option or a lifecycle investment option.
What are the MySuper investment options?
There are two ways super funds can manage your investments through MySuper accounts. They’ll either use a single diversified investment strategy or a lifecycle approach.
Source: Money Smart
Single diversified investment strategy
Most MySuper options use this strategy. If you do nothing your money will be put in a standard mix of investments and the risk-reward approach will stay the same for your whole life. Check with your super fund about its investment approach.
It’s common for these funds to have a balanced/growth approach to investing with 70% of assets in growth and 30% in defensive investments - safer options.
Lifecycle investment strategy
Super funds that offer a lifecycle option will move your money to more conservative options when you get older from growth investments at the start. This way, you take more risk when you’re young because you have time to ride the ups and downs of financial markets.
As you get older, your super fund will reduce your risk to secure what’s been built up over your life.
You don’t have to make changes yourself with a lifecycle option. Your fund will change your investments automatically.
The table below shows a typical mix for a lifecycle investment strategy.
|Age (year of birth)||Growth||Defensive|
|Under 45 (or born in the 1970’s or later)||85%||15%|
|45-54 (or born in 1960’s)||75%||25%|
|55-64 (or born in 1950’s)||55%||45%|
|65+ (or born before 1950’s)||40%||60%|
Compare the pros and cons of MySuper
- You can choose where your super is invested.
- MySuper must offer standard level of life and Total and Permanent Disability (TPD) insurance.
- It’s easy to use and manage.
- Investments are more competitively priced.
- Some critics say MySuper places too much emphasis on fees and not enough on performance.
- Financial illiteracy will make it harder to choose your investments.
Beware of the traps
One of the drawbacks of MySuper is that the fund will have a single, diversified investments strategy. Unfortunately, this places everyone in a one size fits all model. This may be appropriate for some, but an individual’s superannuation balance needs that control and flexibility is paramount.
MySuper, whilst a good initiative, is certainly not for everyone. You have to make sure that it’s the right option for you.