MySuper approaches $650 billion

At a time when default superannuation is under the Productivity Commission spotlight, it is important to recognise MySuper now represents one-quarter of Australia's $2.6 trillion super system - and it's growing fast.

Latest Rainmaker analysis of APRA data shows MySuper assets amounted to $642 billion as at 31 March 2018, growing 16% in 12 months. It's twice as fast as the 7% growth rate for superannuation overall, Rainmaker noted.

Additionally, MySuper now accounts for more than 50% of pre-retirement, APRA-regulated superannuation assets if you exclude self-managed super funds (SMSFs) and retirement assets.

While the growth rate of MySuper assets is on an exponential path, questions are being raised publicly about whether the products where these assets are invested are achieving the best outcomes for members.

Recently the Productivity Commission said about 1.7 million member accounts and $62 billion in assets were in MySuper products that underperformed conservative benchmarks over the 10 years to 2017. If these members instead received the median return from the Productivity Commission's top-10 'best in show' MySuper model , "they would collectively be $1.3 billion a year better off."

Rainmaker's latest 12-month analysis noted "there is massive performance variations within the MySuper sector with the highest performers generally achieving almost triple the returns of the lowest performers regardless of segment, investment type or age cohort."

It added the top performers in lifecycle MySuper strategies were predominantly not-for-profit superannuation funds, even though 68% of these strategies are held by retail super funds.

It should be noted not-for-profit funds, which includes industry funds, control 83% of the MySuper sector and this ratio remain unchanged during the past year.

Finally Rainmaker said the 12-month average net investment return for single investment strategy MySuper products was 7.1%, considerably higher than the 6.1% overall average return for lifecycle products.

Looking at age cohorts in the 12 months to March 2018, lifecycle products materially underperformed single strategy products in the 50-59, 60-64 and 65 years and older age cohorts. However, there was matched or better performance in the under 30, 30-39 and 40-49 cohorts.

Finally, over three years, lifecycle MySuper products matched single investment strategy MySuper products for members in the under 40 years cohort, but underperformed in the other age groups.

"This underperformance [is] becoming more pronounced as members get older," Rainmaker said.

Read more: MySupersuperannuationlifecycleProductivity CommissionAustraliaRainmaker Informationresearch
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