MySuper and choosing a super fund

The default product in a fund

The ATO describes them this way: “MySuper products are basic superannuation accounts without unnecessary features and fees.” A fund can offer different product types, including MySuper and other choice products. Moneysmart calls MySuper “simple, low-cost, and made to suit most people”, while some funds’ choice options let you pick your own mix of asset types, such as Australian or international shares, property or cash. If you don’t choose, the fund decides how your money is invested, and you can change that at any time.

The fees the Act allows on a MySuper product

Section 29V lists the kinds of fee a fund may charge on a MySuper product:

Four of those fees, as section 29V defines them

Fee	What the Act says
Administration fee	“a fee that relates to the administration or operation of a superannuation entity”, including trustee costs that relate to running the fund and are not otherwise charged as one of the other kinds of fee
Investment fee	“a fee that relates to the investment of the assets of a superannuation entity”, which the section says includes performance fees
Buy-sell spread	“a fee to recover transaction costs incurred by the trustee, or the trustees, of a superannuation entity in relation to the sale and purchase of assets of the entity”
Switching fee	“a fee to recover the costs of switching all or part of a member’s interest in a superannuation entity from one class of beneficial interest in the entity to another”

The section also sets out when a fee is an activity fee or an advice fee, each with conditions of its own.

How a fee may be charged

Section 29VA adds charging rules. A trustee of a fund offering a MySuper product “may only charge a fee in relation to the MySuper product during a period if it satisfies one of the charging rules set out in this section in relation to that period.” Among those rules:

• the fee is the same amount for every member of the fund who holds the MySuper product, and is charged in relation to all of them;
• the fee is charged in relation to all of those members, and for each it is the same percentage of the part of each member’s account balance that relates to the MySuper product;
• the fee is an advice fee relating directly to financial product advice given to a member who holds the MySuper product, charged to that member and paid under an arrangement the member entered into, where that arrangement is not an ongoing fee arrangement.

APRA’s yearly performance test

APRA has assessed the annual performance of each MySuper product, and the ATO’s YourSuper comparison tool helps compare MySuper products. The tool gives each product one of three ratings:

• Performing“the product has met or exceeded the performance test benchmark.”
• Underperforming“the product has not met the performance test benchmark.”
• Not assessed“the product had less than 7 years of performance history and has not been rated by APRA.”

A fund must tell you if it underperforms under APRA’s annual performance test, Moneysmart says. A MySuper product rated underperforming for 2 consecutive years can no longer accept new members until it is rated as performing, and that includes someone asking to transfer super into it who is not already a member. Employers using such a product as their default will need to find a different default product for new employees who are not already members of it. The tool page itself says plainly: “The ATO is not a financial adviser.”

Choosing the fund your employer pays into

Most people are entitled to choose the fund their employer pays their contributions into, either when starting a job or later on. Funds differ in fees, investment options, performance and insurance. Moneysmart’s page on choosing a fund makes these points about comparing them:

• look at performance over 5 years or longer, and at how fees and costs could shape returns, remembering that past performance does not guarantee future performance;
• fees can be a dollar amount, a percentage or both, and for the same investment performance lower fees usually help a balance grow faster;
• comparison websites are businesses that may earn money from promoted links and may not show every option, so a rating on one of them is not, on its own, a reason to choose a fund.

Stapling: the account that follows you

1. The choice comes first

   On a new job, the employer must give you the choice of fund your super is paid to.

2. The ATO check

   If you don’t choose, your employer is required to check with the ATO whether you have an existing super account.

3. The stapled fund

   If the ATO finds one, that account becomes your stapled super fund and your employer pays into it; the ATO tells you when your employer has been in touch about your super.

4. No fund yet

   If you don’t have a fund yet, for example in a first job, your employer pays into a default super product they chose.

A stapled fund links to you, not your employer, so it stays with you as you change jobs. Choosing a different fund later means your employer pays into that one instead. The cover that comes with a stapled fund might not suit a new job or personal situation, Moneysmart notes; Insurance through super sets out how that cover works.