When it comes to our financial plan, what’s most important changes over time. When we’re younger, and starting a family, perhaps taking out a mortgage, life insurance is the most important thing. When we get to midlife, super contributions become more important, loading money into super and taking advantage of the mathematics of compound interest.

But when we come to retirement, investment returns become most important.  That’s because the period around retirement is when our super balances are at their highest. It’s what finance nerds call the ‘portfolio size effect’. 

Think about it. When we are starting out in our careers, our super balance is low. A ten per cent return on a super balance of $50,000 is inconsequential, just $5,000. But that same return later in our lives when our super balance is $500,000 equates to a much more significant $50,000.

APRA’s heatmap of underperforming funds

And that’s why super’s prudential regulator, APRA, is seeking to measure super funds’ long-term investment returns and run underperforming funds out of business.  

We were expecting poorly run, subscale super funds to be targeted, but in reality, some of the largest and highest profile super funds have been named and shamed.

Aware Super, the overall second largest super fund in the country, is a case in point. Its Tailored Super Fund has been identified as an underperforming fund, as has Westpac’s BT Super for Life, and Insignia Financial Ltd, the rebranded IOOF, and home of the largest financial planner force in Australia.

Free to choose

The underperformance of these major super funds is a timely reminder of the importance of engaging with your super. Retirement is no time to set and forget.

The late American economist Milton Friedman said it best, “Nobody spends somebody else’s money as carefully as he spends his own. Nobody uses somebody else’s resources as carefully as he uses his own.”

The importance of independence

At When Financial Solutions, we are independent and not tied to any product providers. It means we can provide advice in your best interests every time.

We subscribe to leading research houses, Morningstar and Lonsec, so that we can stay across as many quality investments as possible.

Keep in mind, there’s more to it than investment returns.  We get under the bonnet, and really understand what you’re investing in. Investment returns matter most in retirement, but so does risk. What risks is your super fund taking to achieve its returns?

At When Financial Solutions, we sit beside you and hold your super fund accountable, should it lose its way.  

So, it’s not a matter of ‘if’ you will have confidence in your retirement investments, but ‘when’.

Michael Bowman and James McMaster are co-founders of When Financial Solutions.  This article is general and does not consider your personal circumstances so it may not be appropriate to you.  If you would like advice specific to you, please give us a call.