Understanding Australian Superannuation Fund Performance: How to Compare Funds and Switch Safely

The difference between a top-quartile and bottom-quartile super fund over a 30-year working career can be $200,000-$400,000 or more. Yet most Australians never actively choose their super fund - they accept employer defaults. Active fund selection is one of the highest-leverage financial decisions available.

• Fee impact example: $100,000 in super at 0.5% MER grows to approximately $574,000 over 30 years at 8% gross return. At 1.5% MER (1% higher), the same investment grows to only $432,000 - a $142,000 difference solely from fees
• Performance difference: A fund returning 8% per year vs 7% per year on $100,000 over 30 years: $1,006,000 vs $761,000 - a $245,000 difference from one percentage point of annual return
• Combined effect: A poorly performing fund with high fees can underperform a strong fund by 2%+ per year. Over 30 years, this gap can exceed $400,000 on a moderate balance
• Insurance in super: Many Australians have life, TPD, and income protection insurance inside their super. The fund you're in affects the quality, cost, and terms of this cover - not just investment returns
• Stapling from November 2021: New employees without an existing super account are 'stapled' to their current fund rather than defaulted to the employer's fund. Existing accounts follow you when you change jobs - making your fund choice persistent across your career

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APRA's annual MySuper performance test evaluates the investment performance of MySuper products (the default super products most employees are in) against a benchmark. Funds that fail must notify members - and persistent failure triggers mandatory intervention.

• What the test measures: 8-year investment return net of fees compared to a strategic asset allocation benchmark. A fund underperforming the benchmark by more than 0.5 percentage points per year fails
• Consequence of failure: Funds that fail must write to members within 28 days explaining the underperformance and informing them of their right to choose a different fund. APRA publishes the results publicly
• Second consecutive failure: Funds that fail the test in two consecutive years are prohibited from accepting new members into the failed product. This is a significant regulatory intervention
• Where to find results: APRA publishes MySuper performance test results at apra.gov.au. The ATO's YourSuper comparison tool (ato.gov.au) displays all MySuper products with fee and performance data in a single table
• Funds that have failed: Several funds have failed the MySuper test in recent years - including some employer-specific and occupation-specific funds. Check whether your fund has ever failed. If it received a failure notice letter, take action
• Test limitations: The MySuper test only covers default (MySuper) products - not member-directed investment options. If you have chosen your own investment mix (growth, balanced, conservative), the test does not apply to your specific option. Compare using fund-level performance data instead

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Comparing super funds requires looking at the right metrics - not just headline return figures, which can be misleading depending on the time period and investment option selected.

• Use the YourSuper comparison tool: The ATO's tool at ato.gov.au/superannuation/yoursuper-comparison-tool lists all MySuper products with their annual fees (on a $50,000 balance) and 7-year net return. Sort by 7-year net return to identify consistent performers
• Compare like-for-like investment options: A balanced option (60-70% growth assets) cannot be compared to a high-growth option (85-90% growth assets). Ensure you compare funds on equivalent investment strategies
• Time period matters: Short-term (1-3 year) performance is heavily influenced by market conditions and luck. Compare funds over 7-10 year periods - this smooths out market cycles and identifies genuine investment skill vs short-term luck
• Net return = the only number that counts: After fees and investment costs. A fund with 9% gross return and 1.5% fees produces 7.5% net. A fund with 8.5% gross and 0.5% fees produces 8% net - the second fund is better despite lower gross return
• APRA's Heatmap: APRA publishes a 'superannuation heatmap' showing each fund's fees and performance coloured from green (strong) to red (poor). This is the clearest visual comparison tool available
• Canstar, RateCity, Chant West: Independent rating agencies publish annual super fund rankings and awards. Chant West's MySuper ratings are particularly well-regarded in the industry
• Consistently strong performers (historically): AustralianSuper, Hostplus, Australian Retirement Trust (QSuper + Sunsuper merged), UniSuper, Aware Super, HESTA, Rest, and Cbus have historically appeared in top-quartile performance rankings. Past performance is not a guarantee - verify current rankings at time of decision

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Switching to a better-performing super fund is straightforward - but the insurance implications can be devastating if not managed carefully. Follow the right sequence.

• Step 1 - Check existing insurance: Before requesting a rollover, review your current fund's insurance. Log in and check: what cover you have (life, TPD, IP), the benefit amounts, the premium cost, and the definitions (own occupation vs any occupation for TPD). Download or note the key terms
• Step 2 - Apply for cover at the new fund first: Before switching, apply for equivalent insurance at your target fund. New fund insurance applications may require a health declaration - if you have pre-existing conditions, you may be excluded or loaded. Confirm the new cover is in force BEFORE rolling over
• Step 3 - Transfer the balance: Once new insurance is confirmed, initiate the rollover via myGov (ATO online services) or through the new fund's online rollover form. The entire balance transfers - no partial rollovers required (though partial rollovers are possible)
• Step 4 - Notify your employer: Update your employer's payroll with the new fund details (fund name, ABN, USI) so future SG contributions are directed correctly. Your employer has 21 days to begin contributing to the new fund
• Automatic cancellation of old insurance: Once the rollover is complete and the old account balance reaches zero, the old fund cancels your insurance automatically. If you rolled over before securing new cover, you may be uninsured - this is the most common and consequential switching error
• Insurance in new fund - default cover: Most funds provide default (automatic) cover without a health declaration for new members receiving employer contributions within a specified period. Check the fund's PDS for the eligibility window - typically within 120 days of joining
• Keep records: After switching, retain the confirmation of rollover, your new fund details, and your insurance certificate. Review insurance annually - cover amounts should be aligned to your actual needs

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Most Australians in MySuper default options are in a balanced or lifecycle strategy. Active selection of investment options within your fund can significantly improve long-term returns - particularly for younger members.

• MySuper lifecycle options: Some funds (including AustralianSuper's Balanced and some retail funds) automatically shift your investment mix toward more conservative assets as you age. This 'lifecycle' approach reduces returns for younger members - check if this applies to you
• High growth vs balanced: A 25-year-old with 40 years until retirement has time to ride out market volatility. High-growth options (80-90% shares and alternatives) have historically outperformed balanced options by 1-2% per year over 20+ year periods. On $50,000 over 40 years at 8% vs 9.5%: $1,086,000 vs $2,042,000 - a $956,000 difference
• Ethical/ESG options: Most major funds now offer ethical or ESG (Environmental, Social, Governance) investment options. Performance has been broadly comparable to equivalent non-ESG options in recent years - check current performance data
• Direct investment options: Some funds (Australian Ethical, Hostplus via Choiceplus, AustralianSuper via Member Direct) allow direct investment in ASX shares, ETFs, and term deposits within super. This enables personalised portfolio construction but requires more active management
• Switching investment options: Changing investment options within your existing fund is free and quick - typically effective within 3-5 business days. It does NOT trigger a CGT event inside super (assets are sold and repurchased within the same tax-exempt environment)
• Review age-appropriate allocation: As a rule of thumb, the percentage in defensive assets (bonds, cash) should approximate your age. A 30-year-old: 30% defensive, 70% growth. A 60-year-old: 60% defensive, 40% growth. This is a starting point - your specific risk tolerance and retirement plans matter more

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