As apart of APRA’s new legislation, MyGov Superannuation funds are now under investigation for failing to meet basic benchmarks of performance. Also, with some household funds name and shame. And here is how your Super may have affect:
MySuper – The Default Super
Anyone who has worked part-time as a glassy over the uni holidays or casually in a pizza shop probably has a MySuper account. The MySuper institutions are essentially the ‘default’ superannuation funds. That is elect for people if they have not nominate their own retail or industry fund.
Host Andrew Baxter says that most people who are effectively oblivious to super are typically the ones who hold cash in MySuper organizations. Also, given it had been provided to them by default. This is scary in itself. However, it was the performance of these that really struck a chord with us.
APRA’s Performance Results
The Australian Prudential Regulatory Authority (APRA) investigated 86 of the MySuper organizations as per the new legislation imposed in November 2020. Here, they conducted a basic benchmark performance test. To ensure these funds were up to scratch given they hold around $900B of everyday Australian’s retirement funds. Scarily, 13 out of the 86 funds failed to meet industry standards. Regardless, leaving over 1 million Australians affected. And equated to $56B of funds performing below par.
To put this into perspective, APRA’s ‘benchmark’ return on Australian Equities over an 8-year period had to average 7.88% net of fees. In order to fail this particular asset class. These MySuper funds would need to underperform by greater than 0.5%. And leaving the average 8-year return to anything less than 7.33%. As what is a record high stock market. Also, This is simply not okay and now means that any shamed underperformer has to contact shareholders to let them know they ‘messed up’. In what were low benchmarks anyway. And 13 funds couldn’t simply get their act together over 8 years.
What to Do if you are One of Those Affected
By law, any of the 13 funds that have fail to meet basic performance standards. Probably, are now obligate to convey this to their shareholders. So, what do you do if you are of the unlucky people who receive an email or letter in the mail about this? Host Andrew Baxter talks about the need for financial literacy in the case of superannuation.
As something that most Aussies are disengage with given retirement is something so far down the line for most. It is now an industry that the curtain is lift on so that every day people can secure their nest egg for the future. And Super is no laughing matter. So if you do happen to hold money in of these 13 funds – do some research, get educated. And get it moved over somewhere better. Also, Chances are you probably have super sitting with a number of different funds – in the essence of fees. And make sure you get these consolidated into one fund of your choice for optimal performance.
Choosing the Right Fund for You
The question arises, how do you know which fund and asset class is best for you? Well, this will depend largely on your age and risk appetite. If you’re early 20’s and are happy to undertake risk to grow your nest egg. Also, investing in a bonds or cash fund probably isn’t the best idea. Versus if you’re in the transition to retirement phase. And having your money sitting in a leveraged equity fund. Probably isn’t the smartest idea either.
Host Andrew Baxter says undertaking a ‘fact find’ and risk assessment are good places to start. And are things his team can assist you with at Australian Investment Education to get you started. Despite superannuation and retirement being many moons away for most. It is something you needto be on top of to secure your financial future. Reach out if you need a hand.
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