Highlights

  • Choice super products allow members to actively select how their Superannuation is invested.
  • They differ from MySuper, which is a default, single-strategy Investment option.
  • Choice Options include diversified portfolios, single-asset classes and themed investments.
  • Members can split balances and contributions across multiple investment options.
  • Fees, risks and performance vary significantly between different Choice options.
  • Switching between options is generally easy but may influence long-term outcomes.

A Choice super product is any superannuation investment option offered by an APRA-regulated super fund that is not the fund's default MySuper option. Where MySuper is designed to be a simple default for members who do not engage with their super, Choice products are designed for members who want to actively select how their retirement savings are invested.

Choice options can include diversified strategies with different risk profiles (such as growth, balanced or conservative), single-asset-class options (such as Australian shares, international shares, property or cash), indexed or low-cost options, and themed options such as ethical, sustainable or sector-specific investments. Many funds offer dozens of Choice options across these categories.

The Choice category was formally introduced by the Stronger Super reforms alongside MySuper to distinguish between default and actively chosen investment options. Australian Securities and Investments Commission (ASIC) and APRA both have oversight roles, and disclosure obligations apply to Choice options under product disclosure rules.

How Choice super products work

When a member joins a super fund, their contributions are typically invested in the fund's MySuper option by default. To switch into a Choice product, the member generally needs to log into their account or complete an investment switch form, selecting one or more of the Choice options from the fund's menu.

Members can usually allocate their balance and future contributions across multiple Choice options, sometimes setting different splits for existing balances and incoming contributions. Most funds allow members to switch options multiple times per year, although some apply switching fees or processing windows.

Each Choice option has its own investment strategy, asset allocation, fee structure and performance history. Returns, fees and risks are disclosed in the fund's Product Disclosure Statement (PDS) and Target market determinations (TMD).

Who commonly uses Choice super products?

Choice super products are commonly used by:

  • Members who want to align their super investments with a specific risk profile, time horizon or goal
  • Investors who prefer to choose between single-asset-class options to build a custom portfolio
  • Members with ethical, environmental or values-based investment preferences
  • Engaged investors who follow markets and want more control over their super allocation
  • Members of platform-style super funds that offer wholesale or specialist managers
  • Trustees and members of SMSFs, where almost all investment decisions are Choice decisions by design

Members who do not actively engage with their super, prefer simplicity, or are not confident making investment decisions, often remain in their MySuper product instead.

Key features

  • A menu of investment options spanning diversified, single-asset and themed strategies
  • The ability to allocate balances and contributions across multiple options
  • Disclosure documents including the PDS and TMD for each Choice option
  • Investment fees, performance fees and administration fees that vary between options
  • Optional insurance arrangements that may or may not be linked to the Choice option chosen
  • Independent investment performance data, sometimes including third-party ratings
  • Switching tools and online portals to change investment allocations

Potential benefits

Choice super products can offer several benefits for members who are willing to engage with their super decisions.

Flexibility is a major advantage. Members can choose options that align with their Risk tolerance, time to retirement and personal preferences. For example, a younger member with a long horizon may prefer a higher-growth allocation, while a member close to retirement may prefer more defensive investments.

Personalisation is another benefit. Members can align investments with their values through ethical, sustainable or themed options, and can avoid sectors or strategies they prefer not to support.

For sophisticated investors, Choice options can include sector-specific exposures (such as international shares, infrastructure or property) and indexed options that may offer lower fees than active alternatives.

Key risks and limitations

Choice super products place more responsibility on the member, and that responsibility comes with risks.

  • Higher fees on some active or specialist options can erode long-term returns
  • Concentrated or single-asset options can experience large short-term losses
  • Members may make emotional decisions during market Volatility, such as switching to cash after a downturn
  • Choice options are not subject to the same MySuper performance test, although APRA has expanded benchmarks for many Trustee-directed Choice products
  • Past performance is not a reliable indicator of future returns
  • Frequent switching can disrupt long-term investment strategy and may not improve outcomes

Tax, superannuation or regulatory considerations

Choice super products operate within the same overall superannuation tax framework as MySuper. Concessional contributions are generally taxed at 15 per cent within the fund up to the relevant cap, and investment Earnings in the accumulation phase are taxed at concessional rates.

Switching between Choice options within the same fund is generally not a personal Capital Gains Tax event, but it can result in internal realisations of capital gains within the fund, which may affect unit prices.

Members should also be aware that Choice options come with detailed disclosure documents and target market determinations under the design and distribution obligations regime. Reading these documents helps members understand the strategy, risks and intended audience for each option.

How it fits into Retirement Planning

Choice super products can play an important role in tailoring a member's accumulation strategy to their personal goals. By selecting an option with an appropriate risk profile and time horizon, members may be able to align their expected investment returns and volatility with their plans for retirement.

As retirement approaches, members may gradually shift toward more defensive Choice options to reduce the impact of a major market downturn close to retirement, sometimes referred to as sequence-of-returns risk. Some funds offer specifically designed pre-retirement options for this purpose.

Once a member retires, their accumulation balance is typically used to start a retirement-phase income stream such as an account-based pension, which may also offer a similar menu of Choice options.

Common mistakes to avoid

  • Choosing an investment option based purely on recent performance
  • Ignoring fees, particularly on actively managed or specialist options
  • Selecting a high-growth option without understanding the potential for short-term losses
  • Switching options frequently in response to market noise
  • Holding all super in a single concentrated Asset Class without considering Diversification
  • Failing to revisit Choice settings after major life events such as marriage, having children, or approaching retirement

Questions to ask before using this instrument

  • What is the investment strategy of this Choice option, and how does it suit my time horizon?
  • What are the total fees, including investment, administration and performance fees?
  • How has this option behaved during past periods of market stress?
  • How does this option compare with the MySuper default in terms of fees and performance?
  • Does the option's disclosure document and TMD describe me as part of the target market?
  • Am I comfortable monitoring this option and reviewing it periodically?