Two Sides of the Coin
DEFAULT OR OPTIMISED SUPER STRATEGY
Super is a personal asset. Employers fund it, individuals own it, and the government somewhat manipulates it.
The federal government is responsible for introducing the MySuper default strategy. It began as part of the Stronger Super reforms introduced in 2011 by the Gillard Government to replace existing default super products. Since 1 January 2014, only funds offering MySuper have been eligible to receive default super contributions for new employees.
There are three dominant default MySuper investment models:
- Life Stage or Life Cycle – The asset is de-risked based solely on age.
- Glide Path – At a certain age, future contributions get allocated to lower-risk investment portfolios while the balance remains exposed to growth assets.
- Fixed Strategy – The asset remains in a fixed strategy irrespective of market conditions or age, a balanced option being the most common.
Most people fail to realise that MySuper is a default rather than an optimised super strategy. There is a difference.
No super product provider has ever confirmed that the MySuper default strategy will optimise super.
PERSONAL OR NATIONAL ASSET
Various parties are involved in managing super, and some (i.e. the government) appear unclear about its purpose. Prime Minister Anthony Albanese recently stated that the purpose of super is so “people have dignity at the end of their lives” and that “it is also an extraordinary national asset, a pool of funds available for investing in long-term infrastructure and other investments”.
The purpose of super, as intended by former prime minister Paul Keating, is to ensure future generations of Australians can afford to retire.
Under the original definition, super is a personal asset funded by employers to provide employees with an adequate source of income in retirement.
MASTER TRUST OR INDUSTRY FUND
The overall competitive structure in the financial services industry around super is between master trusts and industry funds. Both have similar service models but different ways of promoting their value proposition to the market.
There is an inaccurate common belief that you get superior results if you select a retail or industry super fund rather than opt-in to your employer’s wholesale super fund.
The truth is that employer plans that have undergone a tender process tend to have the cheapest fees and premiums.
Progressive employers also often provide access to valuable services that help employees optimally manage super throughout their careers.
SUPER REVIEW
Review your super for free using the SuperWiser client portal.
This document was prepared and issued by Super Simpler Pty Ltd (ABN 74 150 240 421) a privately-owned company operating as a Corporate Authorised Representative (CAR No. 468 201) of AXIS Financial Group Pty Ltd (ABN 21 092 889 579, AFSL 233 680). The information contained within it is not advice. It provides general information only and does not take into account your individual objectives, financial situation or needs. You should assess whether the information is appropriate for you and consider talking with your financial adviser before making an investment decision. Information in this publication, which is taken from sources other than Super Simpler, is believed to be accurate. However, subject to any contrary provision in any applicable law, neither Super Simpler, nor its employees and directors, provide any warranty of accuracy or reliability in relation to such information or accepts any liability to any person who relies on it.