With interest rates and the cost of living rising, the last thing on most people’s mind is freeing up cash flow to contribute to superannuation to increase retirement savings.

Rather than boosting super with additional contributions, quite often, a heavier reliance is placed on investment returns within our superannuation funds – but hearing that other superannuation funds have performed better than your fund, leaves most people thinking:Should I change my superannuation fund to that fund to achieve a better investment return?”

Below are a few key points to know before making this the decision.

Where am I invested?

You need to consider what investment option the advertised headline return was for and ensure you are comparing like for like apples for apples. The investment return declared may have been for an investment option that has a higher exposure to growth assets, compared to the investment option you are invested in. Naturally, when investments are performing well, an investment option with greater exposure to growth assets will generally have a higher return when compared to an investment with lower exposure to growth assets (more conservative). It is not the superannuation product that provides the returns it is the underlying assets you are invested in.

Am I comfortable with how my superannuation is invested?

You may want to achieve high returns and invest your super in growth assets, however higher investment return generally comes with higher risk, and then you are faced with risk-return trade-off. To determine what risk-return trade-off is most suitable for you, factors such as your risk tolerance, years to retirement and the potential to replace lost funds, and investment timeframe, should be taken into consideration to ensure an appropriate and rational decision is made.

Once you have taken these factors into consideration, if you passed the ‘sleep test’ (sleeping easily at night, and not worrying where your super is invested or worrying when it drops in value) provides a good indication that you are comfortable with how your super is invested and it is appropriate for you.

The performance shown may not reflect how your superannuation account has performed but the underlying investment only.

The inflows and outflows within your specific account alters the overall return of your account. The advertised investment return may only reflect the investment performance itself and what the returns have been for that specific investment.

Understanding how your superannuation is invested can provide you comfort that your superannuation fund is appropriate, and the money invested for your retirement is working hard for you.

Authored by Jess Lewis.
This article was first published in the Summer 2022/23 issue of HLB Mann Judd Perth’s Client Alert.

Jess Lewis (ASIC No. 431242) and HLB Wealth Pty Ltd (ASIC No. 428645) are Authorised Representatives of Paragem Pty Ltd ABN 16 108 571 875, AFSL 297276. The information contained in this article has been provided as general advice only. The contents have been prepared without taking account of your personal objectives, financial situation or needs. You should, before you make any decision regarding any information, strategies or products mentioned in this article, consult your financial advisor to consider whether that is appropriate having regard to your personal objectives, financial situation and needs.