Superannuation winner or dud fund? Use this acid-test to find out

This is part one of a two-part series on how to supercharge your super. Part two will focus on how to work the system so you can stop work early.

Superannuation has a serious branding problem, and it's not just its name.

Add in ‘buzz’ terms like asset allocation, concessional contribution, and salary sacrifice and it’s no wonder so few people are actually ‘buzzing’ about it. Plus, super has had a jaw-clenching few years.

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The share market dropped by half when COVID crashed into our lives in early 2020. Then, the average balanced super fund went up 17.5 per cent the next financial year (2020-21) before dropping 3.4 per cent the next (2021-22), according to SuperRatings.

It hurts to look. So, here’s the fast, just-what-you-need-to-know version of what happened to your money in the year just passed.

How your super looks today

Uncomfortably, the extreme volatility continued into 2022-23. Five of the 12 months over the past financial year saw the average balanced super fund – which is about 70 per cent exposed to shares with the rest in more stable assets - register negative returns. In other words, the returns went backwards.

But, happily, the sharemarket brought the year home strong, and the average balanced fund ended up growing by 9 per cent. Since then, the ASX/S&P200 of Australia’s largest companies has leapt a further 5 per cent. In other words, your super balance will be fatter still.

But that’s just the average. In fact, the top 10 superfunds all put on 9.6 per cent or above. And you could have made as much as 13.3 per cent if you were lucky enough to be with ESS Super Accumulation - Basic Growth.

Just an important note about the type of funds in our table. The vast majority are industry rather than retail funds. Remember that “Compare the pair” advertising campaign a few years back? The PR push - by industry super funds - was that industry super funds were not-for-profit and were run for the benefit of their members, rather than for shareholders. And it’s paid off for their members.

Note all our figures are net of fees to show the end benefit to members - from either low (typically levied by industry funds) or higher fees (more likely their retail fund opposite numbers). So, the figures are apples compared with economic apples.

But those above are just for one year.

How does your superfund stack up?

Here's the acid-test fund check. When it comes to superannuation, you should be vaguely interested in your fund's performance last year but far more focused on how it’s gone over the long term.

Here are the top 10 over 10 years. Again, many are industry funds.

If your fund is in this table too, you are on to a winner. But, if it’s not, here’s the two-question, acid-test fund check to ascertain whether you’re using a dud fund.

1. Has the fund performed better than 7.5 per cent, on average, every year over the past decade?

2. Has the fund performed better than 7.1 per cent, on average, every year since super was introduced in 1992 (if it was around)

If your fund ticks both of those boxes, fabulous. It is a quality fund – its managers have made decent returns in all sorts of different investing conditions.

But, if not, it may well be time to change to one of the funds in our best-of-breed table, above. Your future depends on it.

In part two of this two-part series on how to supercharge your super, I’ll look at all the new tips and tricks to help you work the system, so you can stop work earlier.

Nicole Pedersen-McKinnon is the author of How to Get Mortgage-Free Like Me, available at www.nicolessmartmoney.com. Follow Nicole on Facebook, Twitter and Instagram.

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