Millions of younger Australians are missing out on higher superannuation returns by investing in relatively low-risk MySuper accounts, and their losses could mount to hundreds of thousands of dollars over the longer term.
Our analysis reveals a significant outperformance with important implications for wealth generation. Younger Australians are much better able to cope with the negative returns from an all-equities approach as they have ample time to recover and benefit from the majority of years that stock markets gain. So they can afford to take on more risk in higher-growth superannuation funds than those offered in MySuper accounts.
There are currently around 61 MySuper products which are intended as low-cost, simple products suitable for most investors. Most are balanced funds, with a static 70:30 growth-defensive asset portfolio allocation, though a small number are lifecycle funds, in which investors’ exposure to defensive assets increases as they approach retirement age.MySuper products were designed to cater for a largely disengaged customer base given superannuation’s distant payoff.