Mine was lime/free reader but that doesn't mean he was greater reader, it only meant he was good decoder.
Reading is not just be able to read(decode) harder words. It's about everything else as well.
By yr3, most of NT children become similar levels, and there will be not much comparing levels. So I think if your child is less advanced than average MN children, don't worry and keep reading. If they are struggling, you may need to be proactive about teaching phonics.
If they are ahead, just give them books to read and keep reading as well.