Productivity Commission draft report

Rice Warner MySuper versus Choice research

The Rice Warner research – commissioned by the Australian Institute of Superannuation Trustees (AIST) – points to significant differences in future retirement outcomes between members of MySuper funds compared to other products in the so-called “Choice” sector.

The research – which uses past performance data of both sectors to forecast retirement outcomes in a decade’s time by 2027 – suggests that individual members who remain in underperforming Choice products could be as much as $50,000 worse off at retirement compared with those who invest their super in a MySuper fund.

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Key findings of the Rice Warner research

  • Collectively, Choice members could be as much as $52.5 billion worse off in ten years’ time compared to MySuper members.
  • If all members of APRA-regulated funds had fees and returns consistent with the average MySuper product, super assets would be $52.5 billion high in (today’s dollars) in a decade’s time.
  • Modelling for singles and couples with different income levels and also for those who take a five year career break, shows that in every scenario individuals are worse off in the Choice sector.
  • For low income people ($30,000) the difference in retirement balance is around $17,000; for medium income ($60,000) the difference is $30,000 and for high income ($100,000) the difference is about $50,000. At all income levels, this difference in percentage terms is  about 10%.
  • While the Choice sector has a higher proportion of older members invested in defensive assets, high fees – notably in retail Choice funds – are also key factors behind the underperformance.
  • The average total fee (excluding advice fees) in the Choice sector is 0.83%, compared to 0.78% in MySuper.