Vanguard has launched its much, and sometimes anxiously, anticipated low cost, passive investment superannuation range of products.
Vanguard has launched its much anticipated low cost, passive investment superannuation range of products under the name of Vanguard Super SaveSmart today.
The company’s MySuper default option is a lifecycle option that automatically rebalances members’ investments in 36 different stages and costs 58 basis points a year.
The fee includes the fund investment fee, administration fee and transaction cost and excludes activity fees and insurance premiums and won’t change over the life of the product.
“Vanguard believes saving for retirement shouldn’t be complex. We want to deliver members a low-cost, high-quality super fund that includes a default offer designed to move with them right through life,” Daniel Shrimski, Managing Director of Vanguard Australia, said.
As the first new entrant into the Australian superannuation industry in years to gain an RSE licence, and launching despite industry consolidation, we’re here because we truly believe we can improve retirement outcomes for Australians and be a catalyst for much needed change in the industry
“As the first new entrant into the Australian superannuation industry in years to gain an RSE licence, and launching despite industry consolidation, we’re here because we truly believe we can improve retirement outcomes for Australians and be a catalyst for much needed change in the industry.
“There remains a lot of variety in how superannuation fees are constructed and communicated to members – making it difficult to truly understand how much they are paying each year,” he said.
Vanguard Super has purposely priced its MySuper option at the lowest price in the Australian superannuation market for member balances under $50,000, and for members aged 47 years and under.
But all products are passively invested, making use of indices rather than active managers.
“The indexing approach to investment management is central to the investment options we currently offer through Vanguard Super SaveSmart,” the company said in an explanatory document.
Options
Besides the lifecycle option, Vanguard Super offers a broad range of options, including premixed options such as Conservative, Balanced, Growth, Ethically Conscious Growth and High Growth, as well as single sector options including International Shares, Australian Shares, Australian Fixed Interest, Global Fixed Interest and Cash.
The commonly seen options in competing MySuper products across the super sector, such as the Conservative, Balanced and Growth options, are even lower priced than the lifecycle option, costing just 56 basis points a year.
Vanguard is also planning to offer a pension product in the future and said that as the asset under management grow it might reduce fees even further.
this is just the beginning for Vanguard Super; we will soon add a competitive pension offer... As Vanguard Super grows, we’re committed to passing the benefits of scale back to members through lower costs and an ever-improving member experience
“But this is just the beginning for Vanguard Super; we will soon add a competitive pension offer and digital access for advisers,” Shrimski said.
“As Vanguard Super grows, we’re committed to passing the benefits of scale back to members through lower costs and an ever-improving member experience – just like Vanguard has done for both Australian and global investors since its very beginning,” he said.
In preparation for the launch of its own super product, Vanguard pulled out of the institutional market as it would start to compete with superannuation funds for members.
The move saw Vanguard terminate mandates issued by Aware Super, Sunsuper, and QSuper, with SSGA emerging as the main beneficiary of the decision.
Lifecycle Option
Vanguard Super’s lifecycle option adjusts 36 times over the course of a member’s life without switching fees.
Lifecycle members aged 47 and under are invested in a diversified portfolio with an allocation of 90 per cent to growth and 10 per cent to defensive assets.
From age 48, the Lifecycle investment undergoes a series of annual changes reducing the allocation to growth assets, while increasing the allocation to defensive assets.
From age 82 onwards, the asset allocation is designed to have a greater emphasis on reduced risk to shield retirement savings from the impacts of volatility, the company said. The asset allocation then ends up with 40 per cent growth assets and 60 per cent defensive assets.
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