APRA stands for a few things: Australian Professional Rodeo Association, Arizona Pylon Racing Association and Australian Prudential Regulation Authority. The boring sounding one is the one I’m interested in as their job is to oversee banks, insurance companies and most superannuation funds. Recently APRA released a report into the fees of MySuper funds which makes for fairly dry reading, even for those of us who like graphs, charts and all things superannuation. According to moneysmart.gov.au, MySuper funds are designed to be simple and cost-effective to make things as easy as possible for those who choose not to get informed and engaged with their super. They’re a really good idea as they are the default fund for employees who don’t choose their own fund, and as they are “cost-effective” it means that you could expect your MySuper fund to not rip you off when it comes to fees.

Surprisingly, the APRA report showed fees being charged on MySuper products was over a huge range. On a member balance of $50,000 the cheapest MySuper fund in the survey charges fees of $265, which is really good value for money. The most expensive fund charges fees on a $50,000 balance of a whopping $1,322. That’s an enourmous range for a product that really shouldn’t differ much from one provider to the other, and it’s another reason to ensure that you are aware of how much your fund charges you.

So, you may ask, which MySuper fund is charging the lowest fees? I dunno. Despite the APRA report going to 20 pages, it doesn’t actually tell us the names of any of the funds.

Thanks APRA. Super job.

With today’s repeal of the Mining Tax by the federal government comes bad news about your superannuation. How does that work? Well when Labor introduced the Mining Tax they attached a bunch of things to it to spend that tax revenue on, and one of those was attached to super increases.

Currently if you are an employee your boss has to whack 9.5% of what you earn into super on your behalf. That was to increase to 12% by 2019, or at least that was the plan before the 2013 election. Originally, Tony Abbott said there would be a two year delay before the next small increase in super (of just 0.25%). But today it has been announced that the delay in the increase will be pushed out until 2021. As I feared, the Abbott government would not stick to their two year delay and I still suspect that the eventual planned increase will not be honoured by them.

What this means for you is that there is a really strong chance that you will have to give more thought to putting more of your money into super. You’re better off doing that sooner rather than later and not relying on an increase that may never come. If you don’t whack more of your money into super, due to today’s repeal you will be worse off in retirement.

If you’ve never looked at your super before there is a pretty good chance that the underlying investments are in what’s known as a balanced fund. This would see about 70% of your super invested in growth assets (property and shares) and the rest invested in defensive assets (like cash and bonds). A balanced fund is the default fund where your employer will whack your money if you don’t tell them what sort of risk you are willing to take with your super, and if you’re like around 80% of Aussies, your super will be sitting in a balanced fund. Is it the best option for someone in generations X and Y? I don’t reckon it is and neither do some super providers.

There are a few different super fund providers around who have a different approach to how your money is invested. They will offer a product where the risk that your super is exposed to (and the return you can expect) changes depending on your age. It means that younger people are exposed to higher returns (higher risks) by having a larger percentage of their super in growth assets. As you age and hit significant birthdays your exposure to growth assets lowers slightly such that by the time you are hitting your 60’s and 70’s your  super is protected by having up to 80% or more in defensive areas.

It makes good sense to ensure in the last few years leading up to retirement that you have a high total of cash and fixed interest in your super and only a small amount of shares. Plenty of people who were thinking of retiring just after the GFC hit realised too late that they were too exposed to shares that plumetted in value and left them without enough time in the workforce to recover their losses. In practice that meant eating more catfood in their twilight years.

But this doesn’t mean that as soon as you retire you should have no money in property or the sharemarket, as the trend towards longer life expectancies means a hell of a lot of us will live for 20, 30 or even 40 years after finishing work. It does mean that you should have enough in cash to see you able to ride out a downturn in the markets, so that would mean having at least three years of living expenses in defensive assets. The rest can be invested to provide the growth that you’ll need to see you through until it’s time to go into a wooden box.

I can sense that you’re thinking “This is too complicated, and I don’t need to worry about this stuff for decades.” Let me simplify it for you.

Give very serious consideration to investing your super in growth assets right up until you are within 7-10 years of retirement, then drop your risk back every year until it’s very low by the time you retire. Shovel away at least three years of living expenses into low risk assets while turning up your exposure to growth assets again on the remainder.

Obviously individual circumstances can play havoc with this type of approach, but to me it makes a lot more sense that the one size fits all approach of a balanced fund for life, or a product that will see you reducing your exposure to growth assets 20 years too soon.