Your default super fund was built for Accumulation, is this still right for you?
Most Australians in a default MySuper product have never actively chosen that arrangement. It’s often just the option their employer's default fund uses when no election is made, and for many people it simply becomes the account superannuation contributions have flowed into for the majority of their working life. That default setting is not a neutral, one-size-fits-all option. It is built with a specific member profile in mind, and that profile looks very different for someone just starting their working life to someone within five to ten years of starting the opposite.
What a MySuper default option is designed for
MySuper products are constructed under rules set by the Australian Prudential Regulation Authority (APRA), with an investment strategy calibrated to suit a broad membership base averaged across an entire working life. In practice, that means a strongly growth-oriented asset allocation, heavily weighted to Australian and international shares, designed to maximise long-term returns for a member with several decades ahead of them to ride out volatility. The strategy assumes time is the primary risk-management tool: falls in any given year matter little to a member who will not draw on the balance for another twenty or thirty years. This is generally considered the right choice, as those growth-oriented investments have historically given super members the best long-term returns when assessing performance over decades rather than years.
When the default option ceases to be the right option
For someone within five to ten years of ceasing full-time work, that assumption starts to break down. The time available to recover from a significant market fall shortens considerably, and the balance itself is generally larger and more significant than it was earlier in a career, so the dollar impact of a downturn is bigger even where the percentage fall is the same.
None of this means growth assets should be abandoned. Someone in their late fifties or early sixties may still have a genuinely long-term investment horizon if they intend to draw on the balance gradually over a twenty or thirty year retirement rather than withdrawing it all at once. The real question is simpler: this default setting was never designed with this particular stage of life in mind, so does it still fit? The question is worth asking, not just assuming it does.
What is sequencing risk and why does it matter now?
This is where the concept of sequencing risk becomes relevant. Two people can experience the exact same average investment return over their working life and end up in very different positions, purely because of when the poor-performing years occur (the sequence, or order of returns).
A significant market fall in the last few years before retirement, or the first few years after, does more damage than the same fall spread across a career of steady accumulation. Because there is less time, or less new contributions, to recover the balance before it needs to start supporting an income. This is a different risk to the one most default strategies are built to manage.
Moving from default to active choice
None of this is a case for abandoning your default option. It is a case for finding out what is actually happening inside the account rather than assuming the default setting has kept pace with a changing stage of life.
Many super fund member portals can show the current investment option and asset allocation of your account within a few clicks. Have you looked at what you're invested in recently? For many people the honest answer is no, not since the account was first opened, maybe not even then.
As you change from full-time working and saving, to eventually full-time retirement and spending, your super should change with you. Is just the “default” option still the right thing for you? Doing nothing is still a choice, just make sure it’s an informed one.