Superannuation Returns: Busting Performance Myths
- Anthony Caneva
- Feb 4
- 9 min read
Updated: Feb 6
Introduction
Picture this: You check your super balance and notice your colleague's fund grew twice as fast as yours last year—despite you both having 'high-performing' funds. Frustrating, right? Here's what's really going on...
If you’ve ever heard the phrase “Your super fund’s doing well” and assumed it’s the fund itself responsible for your returns, you’re not alone. Many Australians share this misconception—believing that superannuation is simply a product rather than what it really is: an account, which can be used for holding and managing your investments, among other things.
In this blog, we’re here to clear things up. We’ll tackle the myth that superfunds themselves “deliver” your investment returns, shining a light on the reality: you choose the investments that go inside your super from a menu of options offered by your superfund. Along the way, we’ll explore how those choices—like deciding between high-growth or conservative options—are what truly shape your retirement nest egg.
Our goal is to empower you with knowledge. We’ll walk you through everything from how superfunds structure your investment choices, to why lifecycle funds can be helpful (yet still need your attention), to the traps that can occur if you don’t fully understand the flexibility super offers at retirement. By the end of this article, you’ll feel more confident managing your super and, hopefully, more excited about the possibilities it holds for your financial future.
So, let’s bust this myth and learn what’s really going on inside your super!
The Myth: "Superfunds Deliver Investment Returns"
One of the biggest misconceptions in Australia’s financial landscape is that “superfunds deliver investment returns.” And it’s not your fault. Media, the regulator and superfunds themselves have all reported performance numbers and conflated them with their own product and brand.
But here’s the truth: a superannuation fund is essentially an account—a kind of bucket where your employer contributions (and any extra contributions you choose to make) are deposited. The funds you contribute then get invested according to your selected investment option.
Imagine you’ve just finished a meal at a restaurant with a friend. Blaming (or praising) your superfund for your returns is like blaming (or praising) a restaurant for how satisfied you feel, when what really matters is what you ordered. Your friend who chose the signature steak might rave about the place, while you're underwhelmed by your side salad. Same restaurant, totally different experiences—just like your superfund. In the super world, your fund is the restaurant, what you order from the menu is how you’re invested —like shares, property, cash, or bonds.
So, when you hear, “XYZ Superfund performed exceptionally well this year,” it’s actually shorthand for “XYZ Superfund’s chosen or default investment mix (often known as the Balanced, Growth, or another named option) experienced strong returns this year.” But that’s just one possible investment option out of many. If you have funds in a conservative or cash-based option with the same superfund, your experience of “performance” could be completely different.
Remember, the core point is that the superfund is not the engine that creates investment returns. You are effectively choosing the engine.
The good news? You have the power to drive. Once you bust the myth that the “fund does it for you,” you’ll realise how important it is to be informed about your super’s investment options and take control of your own wealth-building journey.
What Really Determines Super Performance?
Now that we’ve busted the big myth, let’s drill down into what really determines whether your super goes up or down. The short answer is the underlying investments—and, most importantly, the mix of these investments.
Superfunds generally offer a range of different portfolios or investment options you can choose from. These commonly include:
Shares (Equities): Investing in Australian and/or international companies.
Property: Could be property trusts, commercial real estate, or other property-related assets.
Bonds (Fixed Interest): Loans to governments or corporations.
Cash: Essentially the safest option but with minimal potential for growth.
Each of these asset classes has its own risk-and-return profile. A “Growth” option typically has a larger portion of shares and property. A “Conservative” or “Defensive” option usually has more bonds and cash.
The key is: you get to choose (or at least, you get to review and confirm the default). This is why it’s crucial not to assume your superfund “performs well” without knowing what type of investments you’re actually in. Two people could be with the same super provider but have vastly different outcomes based on their underlying investment mix.
So, if your balance doesn’t seem to be growing as quickly as your neighbour’s, it’s not necessarily because the fund is doing a poor job. It might be because you’re in a conservative or cash option that prioritises stability over growth. Conversely, if you see big swings (both up and down) in your balance, you may be in a higher-growth option that is more responsive to market fluctuations.
Understanding this dynamic is step one in making smarter choices with your super. Knowing how different asset allocations impact performance puts you in the driver’s seat, giving you the chance to optimise your investments according to your lifestyle, goals, and risk tolerance.
Superannuation on Autopilot
Now, if you're thinking, "I've never chosen any investments!", you're probably in what's called a default investment option. This is the standard investment mix your fund assigns when you haven't made an active choice. They will typically invest in a variety of asset types – shares, property, bonds, cash, private equity, infrastructure, etc. And it’s common to find an allocation of 60-80% in growth assets (like shares and property), with the remainder in defensive assets (like cash and bonds). Some default options are what we call lifecycle funds, but not all of them.
Lifecycle funds (sometimes also known as a “lifestage fund”) are relatively unique to superannuation.
What is a lifecycle fund?
It’s a type of investment option that automatically adjusts its mix of assets (shares, property, bonds, cash, etc.) based on your age. When you’re in your 20s, 30s, or even early 40s, your super is invested more aggressively. Why? Because your investment timeframe provides you enough time to ride out the market’s ups and downs. Historically, shares and property have provided stronger returns over longer periods—meaning your balance has time to recover from any short-term market drops.
As you inch closer to retirement—your 50s and 60s—the fund gradually shifts your investments to more conservative or defensive assets, like bonds and cash.
Set-and-forget doesn’t necessarily mean forget forever. It’s still worth checking in periodically to see if the strategy aligns with your personal risk profile, financial situation, and retirement goals. Some people reach their 50s or 60s and realise they still have the capacity or desire to maintain a slightly higher growth exposure, especially if they plan to work longer or have other secure income sources. Others may want to be even more conservative earlier.
The point is that a lifecycle fund is designed to do some of the heavy lifting for you in terms of asset allocation, but it isn’t one-size-fits-all. Your financial journey is personal, and while lifecycle funds offer a systematic approach, it’s always important to check whether the “cruise control” setting matches your unique destination.
Want to know how we can help without taking control of your money?
Why This Misconception Matters
You might wonder, “Why make such a big deal about this myth? Is it really hurting anyone?” The answer is a resounding yes, because misunderstanding how super works can lead to poor financial decisions and outcomes.
For instance, consider a superfund member called Alice. She’s in her 30s and notices her super balance has barely budged over the last couple of years. She assumes her superfund is “underperforming,” gets frustrated, and contemplates switching funds. However, upon reviewing her statements carefully, she realises she’s actually in a low-risk option with a high allocation to cash and bonds. The fund wasn’t “failing”—it was simply doing what it was designed to do with that investment mix. Once Alice becomes aware of her choice, she decides to switch into a more balanced or growth-oriented option that fits her longer time horizon, improving her potential for higher returns.
This kind of scenario happens more often than you’d think. The misconception might cause people to bounce between superfunds looking for “performance,” when what they really need is to choose the right investment mix within any given fund.
This misunderstanding isn't just about missing out on returns. It can lead to some pretty costly decisions, especially when retirement comes knocking.
The Retirement Trap: "Super is a Bad Investment"
Another myth that tags along when you don’t fully understand super is the notion that “Super is a bad investment.” This often rears its head when people hit retirement age and consider their options. They’ve spent decades hearing about super’s contributions, fees, and occasional market dips. Then, at retirement, they think, “I should withdraw all this money before superannuation falls again.”
But let’s break it down: superannuation is simply a tax-effective account. Yes, inside that account are investments that can go up and down in value. But super itself isn’t inherently “good” or “bad.” It’s a structure that gives you potential tax advantages compared to just investing in your own name.
Once you tick the right boxes – your age, your working status, etc - you can choose to roll your super into what’s called an account-based pension (or retirement pension account). The tax treatment of assets in this account is even more favourable than the account you make super contributions into. On top of that, the money withdrawn from this type of account as an income is often not taxable.
If you really dislike market volatility, you can keep your superannuation money in more conservative investment options, like bonds or cash, and still benefit from the tax advantages in an account-based pension. Or if you still want growth, you can keep a healthy portion in shares and property. The flexibility is there. You don’t have to empty the entire bucket just because you’ve stopped working.
So, is super a “bad investment”? Absolutely not. It’s a structure where you maintain control and enjoy tax perks. How “good” your returns are depends primarily on the investments within your super and how well you manage it. For many Australians, staying in super beyond the working years can be one of the smartest retirement planning moves they ever make.
Still with us? Good—because you're now better informed about super than most Australians. But knowledge without action is just trivia. Let's turn this understanding into real-world results
How to Take Action: Making Smart Super Choices
Ready to take the reins of your super? Here’s a straightforward checklist to help you make more informed decisions and get the most out of your superannuation:
Check Your Current Investment Option:
Log into your super account (or read your latest statement) and see whether you’re in a Growth, Balanced, Conservative, or another option. This is step one—knowledge is power.
Compare Different Investment Choices:
Most superfunds offer a range of investment menus. Research and compare the asset allocations and past performances. But remember, past performance isn’t everything; also consider fees, risk profiles, and alignment with your goals.
Consider Your Risk Tolerance and Time Horizon:
How comfortable are you with your balance fluctuating? Are you decades away from retirement and can afford to ride out market swings, or do you need more stability soon? Tailor your asset allocation accordingly.
Learn About Pension Accounts and Tax Benefits:
If retirement is on your radar, read up on how transitioning to an account-based pension can reduce your tax and provide a steady income stream. This can significantly impact your lifestyle and savings longevity.
Check if You’re in a Lifecycle Fund:
See whether your fund offers a lifecycle or lifestage option that automatically adjusts your asset mix over time. If you are in one, ensure it still aligns with your personal preferences, especially as you get older or if your circumstances change.
Seek Financial Advice if Needed:
Superannuation can be complex, especially when dealing with contributions, transitions to pension accounts, and tax considerations. Your superfund may offer some advice services at no additional cost (that means it’s part of the many services your fund already offer based on the fees you already pay).
Following these steps can help you avoid costly mistakes and ensure your super is working for you, rather than leaving it to chance or outdated assumptions. Remember, you’re not locked into your initial choice. You can usually switch investment options or even superfunds if you find a better fit. The key is staying engaged and informed—small adjustments now can make a huge difference over time.
Conclusion
It’s time to set the record straight: your superfund doesn’t magically create returns—you do, through your investment choices. Whether you’re allocating heavily to shares for higher growth, balancing out risk with bonds, or taking the conservative route with cash, it’s your selection that drives the performance.
And let’s not forget the retirement piece: super is not a “bad investment”. It’s often one of the most tax-effective ways to build and preserve wealth, even after you’ve kissed the nine-to-five goodbye. Rolling over into a pension account can keep the money working in your favour, providing tax advantages and regular income.
So, what’s next?
Log into your super account today.
See exactly where your money is invested.
Make sure it matches your financial goals.
If in doubt, talk to a professional.
At Money Empowered, we’re passionate about helping Australians take control of their financial future. If you’re ready to explore how super can fit into your bigger wealth-building strategy or if you just want to make sure you’re on the right track, we’re here to help.
Remember: a small step now can set you up for a more confident, secure, and empowered retirement. Your super is a powerful tool—if you use it right. So don’t leave it gathering dust like that unwanted Christmas gift. Log in, take control, and get your money working as hard as you do!
Comments