Are Default Super Funds Good? What You Get and What You Might Miss

Australia’s default MySuper funds — the super products you’re placed in when you don’t make an active choice — have improved dramatically since the introduction of MySuper in 2013 and the APRA performance test from 2021. Many are genuinely good. But “good enough” depends on what you need and what alternatives exist.

What Do You Get With a Default Fund?

A MySuper default fund provides:

• Employer SG contributions paid to a regulated, APRA-supervised fund
• A diversified investment option — typically 60–80% growth assets for accumulation-phase members
• Default insurance — life (death cover) and usually TPD; sometimes income protection
• Online access, annual member statements, and call centre support
• Low or capped fees — MySuper products must disclose all fees and have administration fees capped at 3% for low balances

How Do Default Funds Perform?

Performance varies significantly across funds. APRA’s annual performance test data and the ATO’s YourSuper comparison tool show that:

• The best-performing defaults (e.g., AustralianSuper Balanced, Hostplus Balanced, Aware Super) have delivered 8–10%+ per year over 10 years (to 2024) after fees
• The worst-performing defaults have lagged benchmarks by 1–2%+ per year — equivalent to tens of thousands of dollars less at retirement for a typical member
• Several funds have failed the annual APRA performance test and been required to notify members

The 1% per year performance difference may sound small, but on a $100,000 balance over 20 years at 7% vs 8%, the gap is approximately $48,000.

When Default Is Probably Fine

A default MySuper product is likely appropriate if:

• Your fund has passed the APRA performance test consistently
• Fees are reasonable (total cost ratio under 1% for a $50,000 balance)
• You have no strong views on investment options (ethical, indexed, sector)
• Default insurance cover roughly matches your needs
• You are in a large, well-run fund (AustralianSuper, Australian Retirement Trust, Aware Super, Hostplus, REST, Cbus)

When You Might Want to Choose Differently

A different option may suit you if:

• Your current default has failed the APRA performance test — this is a red flag
• Fees are high — total cost ratio above 1.2% for a $50,000 balance warrants scrutiny
• You want a specific investment option (indexed, ethical, high-growth, sector) not available in your default
• You are self-employed and can choose any fund — you’re not locked in to an employer’s default
• Your default insurance doesn’t match your needs (e.g., different occupation, different benefit periods)

The Compounding Impact of Choosing a Better Fund

If you are in a fund that has underperformed by 1% per year:

Illustrative only — past performance is not a reliable indicator of future returns.

How to Check Your Default Fund

1. Go to ATO YourSuper comparison tool
2. Find your fund’s MySuper product
3. Check if it has passed the performance test (failed funds are highlighted)
4. Compare 10-year returns and fees against similar products

Frequently Asked Questions

Is my employer’s default fund legally required to be a good fund? Employers must choose a MySuper-authorised default — but there’s no legal requirement that it’s the best-performing fund. APRA’s performance test adds accountability, but employer selection varies.

Can I change from my employer’s default? Yes — all employees have the right to choose their own super fund. Use the Standard Choice Form from the ATO.

Does switching funds reset my insurance? Yes — switching funds typically cancels insurance in the old fund and starts new cover in the new fund, which may involve new waiting periods or underwriting. Check before switching.

How do I know if my default fund has passed the APRA performance test? Go to the ATO’s YourSuper comparison tool and search for your fund. Products that have failed the test are clearly flagged in red. APRA also publishes the full results at apra.gov.au — results are released annually, usually in August or September.

Can I stay in my employer’s default fund but switch to a different investment option within it? Yes — changing your investment option within the same fund does not count as leaving your employer’s default. You stay in the same fund (so insurance continues unaffected) but move from the MySuper default into a choice option such as indexed, high-growth, or ethical. Most funds allow this through their online portal.

What if my employer’s default fund is not a MySuper product? Most employer defaults are MySuper-authorised products. However, some employer-negotiated corporate super arrangements may operate as non-MySuper choice products. If your default isn’t MySuper, it won’t be covered by the APRA performance test or the 3% fee cap — making it even more important to compare fees and returns manually.

How often should I review my default fund? Checking once a year is a reasonable cadence for most people — particularly after APRA releases annual performance test results (usually August–September). A more thorough review every 3–5 years or after a major life event (marriage, children, new job, approaching retirement) is also worthwhile.

Are public sector default funds subject to the same performance test? Yes — APRA’s annual performance test applies to all APRA-regulated MySuper products, including those offered by public sector funds such as CSC (Australian Government Employees Superannuation Trust). However, some defined benefit arrangements and older Commonwealth schemes operate under different regulatory frameworks.

What’s the difference between failing the performance test and simply being a bad fund? The performance test is a specific, narrow measure: 8-year net investment return vs a benchmark based on the fund’s own asset allocation. A fund can fail the test while still having reasonable member services, insurance, or other features. Conversely, a fund can pass the test while still having fees higher than peers. The test is an important signal but only one dimension of overall fund quality.

For more: MySuper Explained, How to Choose a Super Fund, Best Performing Super Funds. For advice on whether to switch, speak with a licensed financial adviser via MoneySmart.