I get it, numbers – not everyone’s cup of tea, especially when there are too many of them being thrown about. But sometimes numbers help – numbers are facts, they are not open to misinterpretation – the context in which they are used of course can be (misinterpreted) but not the numbers themselves. As Pythagoras, the great mathematician said – “Number is the within of all things!”
With that in mind, let’s talk a few numbers today.
- $2.5 trillion – The size of the Australian Superannuation Industry as at 30th June 2017;
- $543.1 billion – Assets held within 40 Industry Super Funds;
- $349.9 billion – Assets in Industry Super Funds held in the MySuper (default) investment option;
- $103.4 billion – Assets in the MySuper investment option in Retail Super Funds (total assets held $588.7 billion).
It’s interesting to note that nearly 64% of the assets held in Industry Super funds (& 18% for retail funds) are within the MySuper investment option. Now, this is a big number, $349.9 billion! There are around 11.27 million Industry Super members, using averages, there are about 7.2 million members whose super funds are invested in the default option. These figures are concerning!
The MySuper option is a default investment option which was introduced effective 1st January 2014. As an investment option, it focusses on lower fees, simplified features and either a single diversified investment option or a lifecycle investment option. Essentially, what this option does is groups all people irrespective of their particular circumstances and needs and invests their superannuation funds in the same asset allocation. The lifecycle strategy is similar, but groups people based on ages assuming all members within typically a 10-year age band have exactly the same needs and goals, which is generally not the case.
How can these members have a successful investment experience when one of the most important decisions for them, i.e. the allocation of their funds between shares, property and fixed interest, has been made on their behalf but not really for them. So, the next time you notice that you or someone else is invested in the MySuper Option or the Lifecycle Option via your Industry Super, have a think, are you like every other person you know?
Niyati Khanna ADFP, Chartered Accountant (ICAI), MBA (Finance & Strategy), is a representative of Alman Partners Pty Ltd, Australian Financial Services Licence No: 222107.
Note: This material is provided for information only. No account has been taken of the objectives, financial situation or needs of any particular person or entity. Accordingly, to the extent that this material may constitute general financial product advice, investors should, before acting on the advice, consider the appropriateness of the advice, having regard to the investor’s objectives, financial situation and needs. This is not an offer or recommendation to buy or sell securities or other financial products, nor a solicitation for deposits or other business, whether directly or indirectly.
Bibliography and source
Industry Funds: These were funds that were predominantly developed by the trade union and industry bodies to provide for their members in retirement. Initially the funds were exclusive and available only to their industry but in the recent years they have opened up to members of the general public.
Source: APRA’s “Annual Superannuation Bulletin June 2017 (released 28th March 2018).