When comparing cars do you simply compare brands or specific car models? This is the thought that entered my mind as I read the never-ending stream of media articles regarding the recently published Australian Prudential Regulation Authority’s (APRA) report on comparing superannuation funds. Without understanding the facts, comparisons are generally too broad. First and foremost, if you are a client of us then the report is of no concern to you.
What is the report about?
As expressly stated in the APRA report, it is a comparison of the MySuper strategy among the 76 funds. The first explanation required is – what is a MySuper fund? If you do not make a choice when your employer sets up your Super fund, then by default the Super fund will assign new members to the MySuper strategy. Super funds use a myriad of data (average age of members, risk profiles etc etc) to create a default strategy they feel will best align with the broadest base of their members. To use the car analogy, the Hilux is the most popular car sold in Australia, it appeals to a broad base of families, tradies, weekend campers, the list goes on. However, it is not likely to appeal to the compactness of the Corolla, or the thrill of speed with a Toyota 86. It is a good combination of safety, mileage and affordability. MySuper is similar as it is not tailored to one specific member type, so it tries to appeal to a broad base of membership.
What is the comparison?
If you compare the most fuel efficient cars, chances are the Hilux is not going to rate as high. Does this make it a bad car? Worse yet, are all Toyotas bad? Is that a reflection of all Toyotas? My point here is that naming a super fund without really specifying the finer details creates confusion, or worse yet, panic induced bad decision making if you do not understand the comparison and the underlying data used.
What can you do?
Firstly, be certain that you are in one of the underperforming funds and the MySuper strategy. If this is indeed the case then it might be time to think about your Superannuation as more than just background noise. Your choices of fund, strategy and fees are your nest egg so pay attention. Secondly, if after reading your statement you realise you are in a MySuper strategy but with a fund that's not underperforming, great! Note that the MySuper strategy is a standard strategy and is not tailored to individual members, so you may want to reconsider if you should be tweaking your investments in the fund. Lastly, your super fund is like a car manufacturer, you don’t search car sales online and type Toyota versus Hyundai, that is way too broad to compare. You need to compare models (i.e. investment strategies) to get a true indication of what you are looking for otherwise you may be driving a Corolla to your next camping trip!
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