MySuper eyes SMSF stronghold

MySuper could soon surpass self-managed super funds as the preferred retirement savings vehicle for Australians, a new Rainmaker report shows.

Using the latest APRA data, Rainmaker's MySuper Report found the MySuper asset pool hit $713 billion at the end of March 2019, growing 11% year on year.

SMSFs on the other hand grew by just 4.5% to $746.6 billion.

MySuper is growing 60% faster than the broader superannuation sector, Rainmaker said.

Lifecycle MySuper assets, which currently account for 40% of all MySuper assets, grew 4% in the quarter mainly due to MLC MySuper moving from a single to a lifecycle strategy.

MLC announced in February it was making the switch. MLC MySuper had 70% allocated to growth assets like stocks, property and infrastructure, and 30% to defensive investments like cash and fixed interest.

According to the Productivity Commission's final report, some lifecycle products "dial down risk too early," elevating the possibility that members will outlive their savings in retirement.

Meanwhile, single-strategy products fail to adequately protect members from the risk that asset prices will fall as they near retirement. "Lifecycle products can address these risks, but many do so at the cost of excessively degrading overall returns," it said.

Rainmaker found MySuper lifecycle strategies underperformed the single strategy index in the older age cohorts. But for younger members aged 35 and under, lifecycle strategies outperformed the single strategies.

In terms of retail versus not-for-profit MySuper products, NFP continues to dominate the default sector with an 83% market share - a position that remains unchanged since March 2017.

NFPs surpassed retail's performance over three and five-year periods. Over the short term however, retail outperformed NFP MySuper products over the quarter and in the 12 months to March 2019, the report said.

MySuper products generated a 7.1% return on average for the year.

Do lifecycle products have the potential to produce greater benefits than single strategy, balanced products? Take this short survey here.

Read more: MySuperRainmakerMLCSMSFProductivity Commission
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