Retirement
MySuper members ‘dumped’ into investment options
MySuper trustees have “not had much incentive to innovate” — meaning members haven’t enjoyed tailored products, rather, they’ve been “dumped” into one-size-fits-all options.
MySuper members ‘dumped’ into investment options
MySuper trustees have “not had much incentive to innovate” — meaning members haven’t enjoyed tailored products, rather, they’ve been “dumped” into one-size-fits-all options.
That’s the view put forward by the Financial Services Council and Tailored Superannuation Solutions (TSS) in a new report.
The two organisations found that “millions” of Australians using MySuper could be missing out on about 35 per cent of their retirement balances due to a “lack of genuine competitive forces targeting better retirement outcomes”.
They explained: “Significantly higher levels of retirement savings can be achieved through reconsidering the traditional design of MySuper products, promoting member engagement with their superannuation and using new technology with member data to create innovative product design.
“Analysis by TSS shows that adopting innovative ‘smart default’ products that take into account a member’s individual circumstances, such as their projected retirement balance and time to retirement, could improve MySuper inflation-adjusted returns from an industry average of circa 3.5 per cent real per annum to 4.5 per cent per annum.
"That amounts to around 35 per cent improvement in retirement balances.”
Further, a “smarter” approach could contribute $5 billion to balances each year over 15 million MySuper accounts, filling the “impending retirement funding gap over time”, given that the 2015/16 Age Pension cost was $44 billion.
Nevertheless, the current industrial awards system and absence of competitive pressure in the default market has meant super fund trustees have been “allowed” to “avoid considering which changes may be necessary to adapt to technological shifts that improve retirement outcomes for members”.
“This has been reinforced by an unwillingness by trustees to invest in new technologies, due to a focus on lowest cost rather than improved retirement balances.”
The report argued that MySuper members rely on trustees to operate in their best interests until the point they choose to engage.
However, when that moment occurs, “those MySuper members who have simply been dumped in a one-size-fits-all investment option by their trustee can hardly be expected… to be enthralled by any offering”.
“The needs of MySuper members have been largely ignored, leading to a stark dichotomy”, the report added, claiming that member attraction and retention would be a key to success.
According to the Financial Services Council CEO Sally Loane, Australia’s 25-year-old system “must be made fit for purpose” by targeting the “retirement objective”.
She said new technology has made it easier to deliver products that are better tailored to individual needs, “but the current industrial default system means trustees have not had much incentive to innovate, until now”.
She continued: “The status quo is not providing solutions to the industry’s issues or contributing optimally to the retirement savings funding gap.”
TSS CEO Douglass Bucknell agreed, adding: “In this digital age, it’s no longer appropriate for MySuper trustees to just dump two 40-year-olds, one projected to retire on the age pension, the other with $1.6 million, in the same investment option for the next 25 years.”
“Trustees tell their choice members to consider their investment horizon and projected retirement balance when selecting an investment option – but don’t follow their own advice when it comes to selecting an investment option on behalf of MySuper members.”
RELATED ARTICLES
Superannuation
Superannuation guarantee rate rises to 12 per cent as parental leave changes take effect
The superannuation guarantee rate has increased from 11.5 per cent to 12 per cent from Tuesday, with super contributions also being added to Commonwealth Parental Leave Pay for the first time. Read more
Superannuation
Rest's Sustainable Growth option achieves highest sustainability classification
Rest superannuation fund has achieved the highest sustainability classification for its Sustainable Growth investment option from the Responsible Investment Association Australasia. Read more
Superannuation
Aware Super slashes admin fees for retirees by up to 25 per cent
Aware Super has reduced administration fees for members with a retirement income account by up to 25 per cent and lowered the maximum annual fee. Read more
Superannuation
SuperAPI co-founder criticises Labor's superannuation tax as 'sneaky tax on young people'
The co-founder of SuperAPI has labelled Labor's proposed tax on superannuation balances above $3 million as a "sneaky tax on young people, tomorrow" disguised as a policy targeting wealthy retirees ...Read more
Superannuation
Election policies could reshape Australia's superannuation landscape, expert warns
Competing superannuation policies from Australia's major political parties could have significant implications for investors and retirees, according to a financial expert. Read more
Superannuation
Industry leaders weigh in on concessional super tax as Budget confirms $55bn investment
Changes to the taxation of superannuation earnings and contributions have drawn mixed responses from financial and payroll sector leaders, as the Federal Budget confirms over $55 billion in ...Read more
Superannuation
Call for indexation on super tax cap as $3m threshold draws criticism
A senior executive in the superannuation technology sector has criticised the Federal Government for failing to index the proposed $3 million superannuation tax cap, arguing the measure will unfairly ...Read more
Superannuation
Rest members back calls for fairer superannuation rules ahead of Federal Budget
Rest has called on the Federal Government to implement superannuation reforms aimed at improving fairness across the system, after member survey results showed strong support for a range of proposed ...Read more
Superannuation
Superannuation guarantee rate rises to 12 per cent as parental leave changes take effect
The superannuation guarantee rate has increased from 11.5 per cent to 12 per cent from Tuesday, with super contributions also being added to Commonwealth Parental Leave Pay for the first time. Read more
Superannuation
Rest's Sustainable Growth option achieves highest sustainability classification
Rest superannuation fund has achieved the highest sustainability classification for its Sustainable Growth investment option from the Responsible Investment Association Australasia. Read more
Superannuation
Aware Super slashes admin fees for retirees by up to 25 per cent
Aware Super has reduced administration fees for members with a retirement income account by up to 25 per cent and lowered the maximum annual fee. Read more
Superannuation
SuperAPI co-founder criticises Labor's superannuation tax as 'sneaky tax on young people'
The co-founder of SuperAPI has labelled Labor's proposed tax on superannuation balances above $3 million as a "sneaky tax on young people, tomorrow" disguised as a policy targeting wealthy retirees ...Read more
Superannuation
Election policies could reshape Australia's superannuation landscape, expert warns
Competing superannuation policies from Australia's major political parties could have significant implications for investors and retirees, according to a financial expert. Read more
Superannuation
Industry leaders weigh in on concessional super tax as Budget confirms $55bn investment
Changes to the taxation of superannuation earnings and contributions have drawn mixed responses from financial and payroll sector leaders, as the Federal Budget confirms over $55 billion in ...Read more
Superannuation
Call for indexation on super tax cap as $3m threshold draws criticism
A senior executive in the superannuation technology sector has criticised the Federal Government for failing to index the proposed $3 million superannuation tax cap, arguing the measure will unfairly ...Read more
Superannuation
Rest members back calls for fairer superannuation rules ahead of Federal Budget
Rest has called on the Federal Government to implement superannuation reforms aimed at improving fairness across the system, after member survey results showed strong support for a range of proposed ...Read more
