10 years of MySuper and bureaucrats are the winners

Mike Taylor

Managing Editor and Publisher

15 March 2024

A decade on from the introduction of the default MySuper superannuation regime to Australia the big winners have proven to be the bureaucrats and the regulators with members marginal winners via lower fees.

That is the bottom line of an analysis of the first decade of MySuper produced by specialist research and ratings house, Chant West.

And while the objective of MySuper was to contain costs, the largest impact has been on retail funds where total fees have been reduced by close to a third.

The MySuper regime grew out of the Labor Government-initiated review of the default superannuation system overseen by former ASIC executive, Jeremy Cooper who later became chairman, Retirement Income at Challenger.

Ten years on, Chant West’s analysis points to a mixed result, stating that your verdict will depend on whether you are a regulator, fund executive or fund member.

“For Government and the regulators, it probably rates as a success. Fees have come down and some underperforming funds have been removed from the system,” the company’s analysis said.

“The industry’s view is generally less sanguine. The heavy emphasis on fees has caused some funds to compromise on how they invest, exacerbated in recent years by having to manage to a performance test that still has unresolved flaws,” it said.

“Arguably, some funds have been removed from the system largely due to flaws in the performance test rather than flaws in the way they were managing members’ savings.”

“Members’ views will of course vary depending on their individual experience with their fund and risk profile. Many will likely take comfort from the perception that the system has driven down fees and protected them from ‘dodgy’ funds with high fees and poor performance.”

“The new lifecycle product design, favoured by most retail funds and a small group of profit-for-member funds, has proven to be beneficial for younger members. But it has led to lower returns for the older cohorts at a time when the size of their account balance magnifies the effect of this performance differential. However, these members have been less exposed to risk as they approach retirement.”

The Chant West analysis said that, along with younger members in lifecycle strategies, the biggest winners over the 10 years of MySuper are those members who were in good growth options at inception and have remained in those products throughout.”

“The better funds have stuck to their investment principles, reduced costs where they could and improved the range and effectiveness of their member services – acting in members’ best interests by maximising their net investment returns. Those members have enjoyed strong performance well in excess of inflation and of the funds’ own objectives, all at an acceptable and appropriate level of risk.”