Superannuation is one of the most successful ways in which Australians invest for their retirement.
One reason it works so well is that we cannot access our money until we reach the preservation age.
That means we're forced to take a long-term view. With our money locked away, there is no risk of us panic-selling when the market is down, or when there is bad news about an ASX stock we're invested in.
And it works for us.
Data from Chant West shows the median growth superannuation fund has delivered an annualised return of 7.9% since superannuation was introduced in 1992.
In FY24, the median growth superannuation fund, which invests 61% to 80% in growth assets like ASX shares and international stocks and the rest in defensive assets like bonds and cash, returned 9.1%.
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2 things that will 'materially impact' your superannuation returns
In a recent article, Vanguard's Chief Investment Officer Duncan Burns said two factors will "materially impact your superannuation balance at retirement".
They are investment performance, and the fees charged by your superannuation provider.
He said:
"We know from our most recent How Australia Retires survey that almost 1 in 2 Australians don't know what they pay in superannuation fees – and that's concerning.
High fees will eat away at your superannuation returns. This is especially impactful if your fund manager does a poor job managing your investments.
So, it's important to know the fees you're paying and your provider's track record for investment returns.
The Australian Taxation Office's online comparison tool allows Australians to compare superannuation providers. The ATO publishes net returns and fees for all the providers' MySuper products.
MySuper is the most basic form of superannuation account.
Vanguard began offering superannuation services in Australia less than two years ago. It now manages $1.5 billion of Australian workers' savings.
All of its superannuation options are low-cost index investments. This reflects the fact that Vanguard was the global pioneer of index-based investing five decades ago.
Burns said:
By using indexed solutions for all Vanguard Super products, we've been able to keep our costs low while still delivering value and strong performance for our members so they can retire with confidence.
Burns said index investing offers three distinct advantages. They are diversification of assets to reduce risk, reliable long-term returns, and lower fees.
Top 10 superannuation funds over 10 years
Chant West recently published a list of the top 10 median growth superannuation funds based on median annual returns over the past 10 years. This list incorporates the results for FY24.
Note: Performance is shown net of investment fees and tax but before administration fees.
| Rank | Superannuation fund name | Median annual return over 10 years |
| 1 | Hostplus Balanced | 8.3% |
| 2 | Australian Retirement Trust – Super Savings Balanced | 8.1% |
| 3 | AustralianSuper – Balanced | 8.1% |
| 4 | UniSuper Balanced | 7.9% |
| 5 | Cbus Growth (MySuper) | 7.7% |
| 6 | Vision Super Balanced Growth | 7.6% |
| 7 | HESTA Balanced Growth | 7.6% |
| 8 | CareSuper Balanced | 7.6% |
| 9 | Spirit Super Balanced | 7.5% |
| 10 | Aware Super Balanced | 7.5% |
