What is MySuper?

If you start a new job and don’t nominate a superannuation fund, there are regulations in place to ensure your money doesn’t end up in a high-fee account. Instead, it will be invested in an option within your employer's default fund that meets the government-endorsed MySuper standard.

So what exactly is MySuper? Let’s dig in!

MySuper isn’t a specific product per se—it’s more a government approved label that a superannuation product must have in order to become the default investment option for the millions of employees that don’t choose their own super fund .

To qualify for this label, the super fund must ensure that its proposed MySuper product is a low-cost and straightforward option that won’t erode your retirement savings with high fees. While MySuper products may not always result in the highest returns, they’re usually a stable and reliable choice.

While it’s not required for a super fund to offer a MySuper product, those that don’t aren’t eligible to become the default fund for any employer in Australia. As you can imagine, not many funds are willing to give up that very large source of potential revenue. So these days you can’t swing a cat without hitting a fund offering a MySuper-qualifying product. 

It’s also worth noting that MySuper funds aren’t limited to new employees. Anyone is more than welcome to invest in the MySuper fund of their choice if it matches their investment needs.

So what exactly does a MySuper product offer? Here are some typical features you'll find in most MySuper products:

• Low fees in general
• Balanced investment approach that isn’t too aggressive or too conservative
• Easy to understand, simple features
• Default insurance cover you can easily opt out of.

Just because MySuper products are fairly basic in their structure and require a standardised approval process, that doesn’t mean all are created equal. In fact, there are two main forms a MySuper fund can take. 

These are:

Single diversified investment option

A single diversified investment option places your investments in a mix of different assets that may include stocks, bonds, real-estate, infrastructure and even cash. These options typically target either a balanced or growth-oriented approach, all within government-approved risk levels.

Although the specific investments within your portfolio might change over time, the risk exposure does not fluctuate significantly.

Lifecycle investment option

This less common MySuper option mimics the often-recommended strategy of making riskier investments while you're younger, and then slowly shifting those into more and more conservative options as you approach retirement. 

The rationale is that younger you can tolerate short-term market fluctuations in exchange for higher long-term growth—a luxury older you might not be able to afford.

In a lifecycle investment option, these adjustments happen automatically based on your age.

Still deciding whether you should keep your default MySuper, or transfer your funds to one of these basic options? Here’s a pro and cons list to help you decide:

In the world of investing, nothing’s ever without risk-free. However, if you’ve ended up in a MySuper account as your employer’s default option, it’s certainly as safe and stable an option as you can find.

So it’s not a bad place to keep your funds while you’re still evaluating your other options. And, if you discover that it matches your needs and goals, it can be a solid place to keep your money.

However it’s important to do your due diligence: get familiar with how your MySuper works, research your other options, and to not look past the services of a financial advisor, who can help you find a product that suits your unique needs and goals.

In fact, the fund that manages your MySuper might even offer free financial advice. While they’ll naturally favour their products over a competitor’s, they can still help you pinpoint what you’re looking for in your investments, help you learn how to tell if a product matches those needs, and give you a clear understanding of the risks and returns involved with different strategies.

Now that you have a better understanding of how your MySuper works, it’s time for you to evaluate it and determine if it’s a keeper, or if it’s time to switch up your approach. Here are some tips to help you determine whether or not it’s the right fit.

• Clarify your investment strategy. You can’t determine if your MySuper is a good fit until you understand your own goals. So think about what you want out of your super. For example, do you want growth, stability, or a balanced mix?
• Check out the Product Disclosure Statement (PDS). The PDS is the single source of truth for your MySuper product, and you can usually download this from the super fund’s website. It will tell you if your product is geared toward growth, balance, or follows a lifecycle approach. See if this approach matches your desired strategy.
• Look at the financials: fees and performance.  Take a close look at the fees in the PDS and compare them to other funds. Then, review the historical performance, which is usually available on the fund's website or through APRA if needed. Are the returns in line with your expectations for the level of risk? This will help you determine whether you’re getting good value, although it’s important to note that past performance is not a reliable indicator of future performance.
• Think about the intangibles. Consider the other factors that can make a difference, like the fund’s customer service, online tools and any perks. These details can really affect your overall experience with the fund.
• Review insurance coverage—if relevant. If the investment strategy, fees, and performance check out, insurance might not be a dealbreaker. Still, it’s worth seeing if the default coverage suits your needs.

MySuper is a solid, reliable super investment that many people end up in by default. But it can also be a solid choice for someone looking for a straightforward and affordable option with a moderate investment approach. If you’ve been placed into one by your employer, just make sure you understand the implications and don’t be afraid to take your investments elsewhere if it’s not for you.

On the lookout for a new super fund? Why not check out some of these solid options: