POWERED BY MOMENTUM MEDIA
Young Australians urged to reconsider low-risk super accounts
An asset management firm has encouraged younger Australians to investigate higher-risk superannuation options for better returns.
According to Innova Asset Management’s analysis of APRA data, 5.2 million young Australians are missing out on higher super returns from being in low-risk MySuper accounts.
The firm discovered that these super options which default to a balanced investment mix underperform compared to other investment accounts.
An all-equities portfolio consisting of Australian shares and unhedged international shares outperformed against typical MySuper balanced funds by 13.6 percentage points over the decade ending 1 September 2023, Innova found.
Dan Miles, Innova managing director and co-chief investment officer, said this was due to the insufficient risk of default super options.
However, he noted that many younger investors can afford higher-risk options as their retirement is decades away.
“MySuper products were designed to cater for a largely disengaged customer base given superannuation’s distant payoff. Those least likely to be engaged – and so invest in default MySuper products – are young people with lower education, those on lower incomes and people with lower financial literacy,” Miles explained.
“However, even younger Australians on higher incomes with relatively higher levels of retirement savings remain invested in lower-returning MySuper products.”
As a result, being allocated to a default super offering does not align with many investors’ long-term goals, presenting an unadvised market of younger Australians who can benefit from higher equity risk investment options.
The managing director added: “Younger investors will need to generate more wealth through superannuation to allow them a comfortable retirement income. While younger investors have the benefit of longer working lives and a rising superannuation guarantee, they will need stronger long-term returns.
“Younger Australians who are by default investing in MySuper products would be better off with financial advice. This represents an opportunity for financial advisers to offer more affordable and scaled financial advice to young Australians.”
AUTHOR
Jasmine Siljic
Jasmine Siljic is a journalist at Super Review. Prior to joining SR, she also worked across other Momentum Media brands as an intern and cadet journalist. She recently completed a Bachelor of Media and Communications at Macquarie University.
Recommended for you
The super fund announced that Gregory has been appointed to its executive leadership team, taking on the fresh role of chief advice officer.
The deputy governor has warned that, as super funds’ overseas assets grow and liquidity risks rise, they will need to expand their FX hedge books to manage currency exposure effectively.
Super funds have built on early financial year momentum, as growth funds deliver strong results driven by equities and resilient bonds.
The super fund has announced that Mark Rider will step down from his position of chief investment officer (CIO) after deciding to “semi-retire” from full-time work.
TOP PERFORMING FUNDS
ACS FIXED INT - AUSTRALIA/GLOBAL BOND
Fund name
3y(%)pa
1
DomaCom DFS Mortgage
76.97 3 y p.a(%)
2
Global X 21Shares Bitcoin ETF
76.46 3 y p.a(%)
3
UBS Solactive Global Pure Gold Miners UCITS ETF Dis USD
51.13 3 y p.a(%)
4
Global X GlobalX FANG+ ETF
45.15 3 y p.a(%)
5
Select Baker steel Gold Institutional
43.78 3 y p.a(%)
