MySuper offerings need an upgrade, with lifecycle options based on more than the age of the member, according to a new player in the market. Trustee Tailored Super has launched Smart MySuper Defaults.
The new product puts default members into one of a number of “lifestyle retirement bands” based on their age, current and projected retirement balance, and time to retirement.
Douglas Bucknell, chief executive of Trustee Tailored Super, describes Smart MySuper Defaults as a more efficient approach to lifecycle investing, able to add 100 basis points to annual returns.
“It is inefficient for trustees to put all their default members in the same investment option. An age-only lifecycle option places two 40-year olds in the same investment option, even if one is projected to retire with $1.2 million and the other with $300,000,” Bucknell says.
In a Smart MySuper Default fund, the member with the $1.2 million projected balance would be invested in a 100 per cent equities option, while member with the $300,000 projected balance would be invested in a 70 per cent growth option.
“Our projected outcomes are based on actual fund data. We are not fund managers, we are just offering to use the fund’s available investment options more efficiently.”
The number of “lifestyle retirement bands” and their asset allocations will vary fund by fund. Bucknell says trustees will make those choices, based on their default member demographics.
Bands could also be based on factors such as gender, eligibility for the age pension and investments outside superannuation in future iterations of the product.
“There is no industry standard being applied. Each fund will have its own LRBs,” he says.
The MySuper system was launched in July 2013, when each registered superannuation entity was required to offer a MySuper product, designed as a simple low-cost option for default members.
July 1 this year was the date by which all remaining default balances had to be transferred to a MySuper product.
Bucknell believes that with the introductory phase of the system completed, super funds will have to turn their attention to the quality of their MySuper offerings. Pressure will come from the regulator, when APRA starts applying the new outcomes test, which will rank the cost-effectiveness of MySuper products.
Trustee Tailored Super was incorporated last year, although Bucknell says the intellectual property for the product was patented in 2010. “It has been a low burn,” he says.
He says the company is in discussions with a number of funds and is running some beta tests.