APRA’s latest heatmap compares the returns, fees and sustainability of default MySuper products and ‘choice’ investment options you select yourself. Disturbingly, 45% of MySuper products and 60% of choice investment options delivered returns below APRA’s benchmarks.
The ATO has also unveiled its new YourSuper comparison tool. So far it only includes MySuper products and has limited functionality, but it’s a step in the right direction.
One positive outcome of all this scrutiny is that more people are taking a close interest in their super, often for the first time. Many have already voted with their feet and switched funds.
How to benchmark your fund
Compare your fund’s targets with the actual returns reported on our Annual Investment Return Report. Returns will be shown for this year and last year.
Our Investment Return Report will compare your actual funds performance against general market performance indicators. Start by checking your returns against the benchmark used for the investment mix you have chosen. You should be able to find this on your Letter to Trustees attached with our audit statement.
You can compare your actual return to the performances of Retail funds. Here are some useful links to use for comparisons
When you compare your fund’s performance it’s important to compare like with like. This means comparing conservative investment options with other conservative options, or sustainable options with other sustainable options.
Just to confuse matters, ratings agencies themselves use different definitions. Close to 80% of Australians in major funds are invested in their fund’s default investment option which is usually the same as their Balanced option.
Chant West defines ‘balanced’ as holding 41–60% growth assets (mostly shares and property) and the balance in defensive cash and fixed interest. It’s Growth category (61–80% growth assets) aligns with what many funds call Balanced. SuperRatings defines balanced as 60–76% growth assets. You need to know where your fund sits on the growth/defensive scale before you can make meaningful comparisons.
Also be aware that accumulation and pension funds will have different returns even where they hold identical investments due to the different taxation that applies to each. If you are in your fund’s pension product, check against other pension products. These tend to have slightly higher returns than the accumulation equivalent because of the favourable tax treatment of super in retirement phase.
SMSFs trustees will need to evaluate their own risk profile benchmarks but the general index returns used in our Investment Return Report is a good starting point.
It’s worth keeping an eye on the returns achieved by public offer funds with a similar investment mix after tax and fees. If your fund is up there with the best or doing even better, well done. But if it is under-performing then you might question why you are putting in the extra effort required to run your own fund.
For more on SMSF performance, see SuperGuide article SMSF returns comparable with big funds.
Remember other benefits of your own SMSF Fund
If you want to hold real property inside super, then an SMSF is the only way to achieve this.
SMSFs also offer more flexibility when it comes to estate planning and the distribution of your super to your beneficiaries in the most tax-effective manner when you die.
If your existing type of level of insurance is not adequate or appropriate, then you can reduce it, top it up or ditch it for insurance cover outside super which may be tax deductible. Before you do anything, compare your current insurance with what’s on offer elsewhere. Your fund may provide tools to do this, or you could use Chant West’s Apple Check to compare annual premiums for your selected type and level of cover across three funds.
Should I close my SMSF fund?
If your fund really is a lemon or it doesn’t offer the services and benefits you need, then use the comparison sites and tools to find a better one and make the switch. Depending on the fund you choose, it may even handle the switch for you.
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