Are you losing out? How default super funds are shortchanging your future

Plain vanilla super funds could be costing us $46 billion

More risk means more reward, which is a lesson that could seriously boost the superannuation accounts of many Australians.

Indeed, some interesting analysis by leading superannuation Investment manager Russell Investments suggest one small change would’ve left a group of superannuation members $46 billion better off.

The contrast in this case is between generic default funds which are designed to cover a range of ages and circumstances compared to age based passive strategies.

Every default account would have been $3,200 higher

The research by Russell found that the difference would translate to an average account balance rise of $3200 for every default MySuper account holder.

While Russell operates the Russell Investments master trust and manages $12 billion in assets for 80,000 members across a variety of investment options, this comparison was based on the performance of Russell’s age-based MySuper solution, GoalTracker.

When that was compared to the superannuation industry’s MySuper options, using Chant West data, over the five years to March 2025, it calculated that 14.5 million MySuper accounts would have achieved an average retirement savings uplift of 6.6% over the period if their investments had been aligned with their age.

Default accounts made to suit everybody

It is not a surprising finding when you realise that default MySuper funds are made to serve the investment needs of an 18-year-old just starting out on their working life all the way through to a person in their late 50’s who is approaching retirement.

By their very nature these funds are a compromise which unfortunately applies to a very large proportion of superannuation fund members who often remain disengaged and stick with the default fund they got at their first job.

The nature of this compromise is that default funds tend to be more conservative, with higher allocations to cash and bonds, and lower allocations to international and local shares.

Russell Investments head of Asia Pacific Jason Edgar said many Australians were stuck in a one-size-fits-all investment that fails to meet their individual needs.

“We now have the track record to prove that personalising super through age-based investing and individualised strategies improves retirement outcomes,” he said.

Age is an important number but other factors can help too

Of course, age is just one starting point for personalising a super account and as Russell points out it is possible to go much further once people are engaged with their superannuation fund.

Then clear retirement income goals can be set, risk tolerances modified and retirement plans made.

Russell said that super funds have a powerful role to play in improving long-term outcomes, through supporting better contribution habits and dynamically managing investment risk.

Fully personalised funds can make further gains

Age-based personalised strategies can incorporate financial goals and risk tolerance, potentially improving further on lifecycle investing which still follows a more passive approach, adjusting allocations based on age.

Even so, the median default lifecycle investment option has consistently outperformed the median default single-strategy investment option across one, three, five, and 10-year periods, according to analysis by Rainmaker Information.

Over the past three years to March 31, six default lifecycle investment options from Colonial First State, Team Super, Virgin Money, TelstraSuper and Aware Super have ranked among the top 10 performing MySuper options.