There's a good chance that your superannuation is one of your largest assets. But how much do you know about how your retirement money is invested?
Recent research from ASIC's Moneysmart found many millennials — which make up 21.5 per cent of the population — were disengaged with their super. The survey found:
- Nearly one in two (48 per cent) millennials say they are "not very or not all knowledgeable about maximising their super";
- Three in 10 (31 per cent) say they check their super performance less than once a year or not at all.
Younger Australians have the most to benefit from being engaged with their super, as even small improvements in performance or fees make a significant difference in retirement outcomes.
"There are huge financial implications," says Xavier O'Halloran, CEO of Super Consumers Australia.
"For someone in their 30s … even half a per cent difference in fees or performance can lead to $100,000 difference [in retirement]."
"That might be the difference between you having a really comfortable retirement and you struggling to pay some of your bills."
Here's how you can check up on your super and what to look for.
The three key things to focus on
Rebecca Pritchard is a senior financial planner at Rising Tide Financial Services in Melbourne/Naarm.
She says there are three key things people should be focusing on when it comes to super:
- What money is going in — how much money is being paid into super by your employer, as well as voluntary contributions (such as salary sacrificing or personal contributions);
- What money is coming out — the fees and insurance premiums you're paying.
- What your money in super is doing — the investment performance of your superannuation savings.
Your first port of call should be your super fund's website or app, which will contain information about fees, investment options and performance.
Your super fund's website or app should also provide information about transactions on your account, which can help you check your employer is paying your super correctly.
You can also check your super balance and employer contributions by logging into the ATO's service on MyGov.
As a general rule, it's worth checking in on your super fund at least once per year to ensure that everything is in order.
How to assess the growth profile of your super fund
When it comes to how your super is invested, Ms Pritchard says it's particularly important to consider the mix of growth assets (such as shares and real estate) and defensive assets (such as cash and bonds).
While growth assets can be more volatile, they tend to perform better than defensive assets over the long-term, Ms Pritchard says. If you're younger, you have more time to ride out the ups and downs.
"Generally speaking, the younger you are, the [higher] you are going to be … on that growth profile. The closer to retirement, the less risk you want to have," Ms Pritchard says.
Again, your super fund's website should contain information about the different investment options and their growth profiles.
According to superannuation research service Chant West, the median performance of a high growth fund (with 81–95 per cent in growth assets) was 8.6 per cent annually over the last 10 years.
The median performance of balanced funds (with between 40–60 per cent in growth assets) was 5.9 per cent annually over the same period. The figures reported by Chant West include taxes and investment fees, but don't include any administration fees.
How to know if you're paying too much in fees on your super
Super funds charge a range of fees including for administration, transactions, investments and insurance.
Ms Pritchard says fees should be considered alongside returns, because if your fund is performing well, you might be happy to pay a higher fee.
As a rule of thumb, if you're paying 1 per cent or more in fees each year, Ms Pritchard says it would be a "flag to have a serious review".
"You don't necessarily need to panic, but you need to ask the question," she says.
According to Chant West, the average total fee for default MySuper products was 0.9 per cent per year for industry super funds in 2023.
Across all MySuper products, the average total fee was 0.93 per cent per year. Chant West's fee analysis assumed an account balance of $50,000.
There are comparison tools, but they have limitations
Unfortunately, when it comes to comparing funds, it isn't always easy.
The ATO has a super comparison tool, but it only covers some products and information it provides is limited, Mr O'Halloran says.
"All you get from the ATO tool, for example, is what the recent investment performance has been, what the fees are, whether it's performing against the performance test," he says.
That might not be enough information to make an informed decision, he adds.
For people looking for ethical or sustainable investment options for super, Mr O'Halloran says the Responsible Investment Association Australasia's comparison tool can be a helpful starting point.
However, like the ATO tool, it does not cover all funds or investment options.
To get a better understanding of how your super is performing, one simple approach is to check the websites of different super providers to see fees and performance for different investment options.
There are also third-party comparison websites that compare super funds. However, keep in mind that these services may earn a fee for referrals and may not cover all products.
You can find exactly what your fund invests in — but it might not be helpful
In recent years, most funds have been required to provide detailed information about their investments under Portfolio Holding Disclosure (PHD) rules.
ASIC requires these disclosures to be made half-yearly, no later than 90 days after June 30 or December 31.
I was able to track down this information from my fund, but it wasn't easy to find on the website.
To make things more difficult, the disclosure came in a spreadsheet file with over 2,000 rows of information about investments all around the world, which wasn't very helpful.
"[Portfolio holdings disclosures] aren't great for consumers," Mr O'Halloran says.
"A lot of super funds are invested in a lot of things, so there's a lot to pore over. Some super funds could be invested in something like 10,000 different assets."
Why progress is better than perfect when it comes to superannuation
Ms Pritchard says it helps to keep things simple and focus on what matters most: performance, fees and investment options.
"Don't overthink it. Don't let perfect get in the way of progress," she says.
She says it's important to consider a fund's returns in context and over the long-term. If the share market has had a bad year, many super funds will have a bad year, too.
"Just because your return is down doesn't mean you should change necessarily. The broader context is going to be important," Ms Pritchard says.
If you're not happy with how your super is going, Ms Pritchard says a starting point is to check if there are other options with your existing fund that better meet your needs.
"Check what your current provider has. If you like it, change. If you don't, move along," she says.
This article contains general information only. You should consider obtaining independent professional advice in relation to your particular circumstances.
