MySuper rollout

Have you made a choice about where your super money goes?
 
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01.A better default option

superannuation-changes-lead

If you’re one of the many Australians who hasn’t made a choice about where your superannuation money goes, the account it ends up in will soon have to meet new standards of disclosure. The countdown for compliance started in July, when the government mandated MySuper initiative kicked off. 

Will your new MySuper default account be any better than your current default account? That depends on how well your existing account aligns with the new MySuper requirements. If your super fund is overly complex, charges high fees, takes commissions, and provides bewildering account statements, chances are it probably won’t qualify as a MySuper account. 

The nature of the change is simple enough: as of 1 July 2013, super funds could start offering MySuper accounts. Then the timeline gets trickier. If your employer’s super contributions are being paid into a default account (one chosen by your employer) with a fund that doesn’t offer a MySuper product, the contributions will need to be switched to a fund that does by October this year. By July 2017, the balance of all default accounts will have to be transferred into a MySuper account. 

Performance not guaranteed

The most important thing to understand is your account’s performance will continue to depend mainly on the services of the fund manager. The central aim of the MySuper initiative is increasing transparency and reducing the erosion of value through fees, not smarter investing. However, the switch to MySuper should bring an improvement in your ability to measure and understand your account’s performance and compare it to othersuperannuation-statistic MySuper products across the industry. 

The three essential ingredients of MySuper accounts – clear and standardised account statements, comparatively low fees, and no commissions for products inside these accounts – means you should be able to compare like for like and identify which funds will make the most of your money. 

If the reform works as planned, all MySuper accounts will have a single investment strategy, disclose all fees and specify how much the account is expected to grow over a rolling 10-year period. 

Cautionary tale

MySuper is the best opportunity we’ve seen for those who haven’t taken charge of their retirement savings to do so, and we recommend you instruct your super fund to move your money to a MySuper product. Taking the matter in hand is crucial because a set-and-forget approach can be so costly. A CHOICE investigation in February last year revealed that many super fund members in the “retirement risk zone” – about five years before and after retirement – were unduly exposed to the plummeting share markets during the GFC. 

Super assets fell $160bn between December 2007 and January 2009, and many saw large portions of their savings disappear. A report from UNSW showed that workers who were 55 years old at the time would need to contribute about 34% of their earnings each year between the ages of 57 and 60 to get their super back to pre-GFC levels.

Superannuation consumer centre

Superannuation is complex, confusing and compulsory. CHOICE believes Australians need better super options when they retire. That’s why we’re leading a campaign to establish an independent superannuation consumer centre. It will focus on the critical five years each side of retirement that can have a huge impact on the income we end up with. 

 
 

 

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