Since January 2014, superannuation guarantee (SG) contributions for employees that do not actively nominate a superannuation fund have been channelled into a MySuper product. The MySuper initiative was part of the government’s stronger super reforms, with the intent to reduce the complexity and cost and to increase the transparency of default superannuation products.
Part of providing a MySuper product is a requirement for the Funds to also make available a MySuper product dashboard, which is intended to provider superannuation members with the following information:
|The return target|
|The returns for previous financial years|
|A comparison between the return target and the returns for previous financial years|
|The level of investment risk, and|
|A statement of fees and other costs.|
Having a dashboard is well and good, but the Actuaries Institute would like to see the compulsory information displayed in a way that is both more detailed and easier for the Fund members to understand. CANSTAR caught up with an Actuaries Institute spokesperson to find out more.
Q: In relation to the dashboards, you have suggested that Funds “replace misunderstood risk labels and introduce a long term investment risk measure” – what types of risk labels do you think might resonate with consumers?
A: In terms of Investment Risk, we would like to see consumers provided with two measures:
- Short-term volatility – essentially the current measure that is inappropriately called the Standard Risk Measure, and
- Long-term growth – which would essentially indicate the chance of the investment return being lower than CPI plus 4% pa over a 20 year period.
This latter measure would provide longer term investors with a measure about how likely the investment will meet their long term growth needs to help provide them with an adequate income in retirement. For example, over a 20 year period, cash will actually be a higher risk investment as it is unlikely to produce the necessary growth to supplement their contributions enough to produce adequate savings.
Q: What is the advantage for consumers in separating investment fees and costs from administration/advice fees and costs?
A: The importance of the various services provided by superannuation funds will vary from member to member. It is therefore very important that consumers are able to assess the value for money they receive for each relevant service. For example, some asset classes or approaches are more expensive than others. Members should be able to compare the investment fees they are paying with the investment approach adopted and the net investment return achieved.
Similarly, members should also be able to compare the administration fees they are charged with the services provided and how relevant they are to their needs (such as call centres, websites, online tools, financial advisers). This proper comparison is difficult to do when the fees shown on the dashboard are all bundled in to one combined number. It would be relatively simple to produce a table of fees and costs with this simple breakdown, as well as the combined total.
So what should a dashboard ideally look like? The Institute produced a sample dashboard in its submission to Treasury dated 1 March 2016 which is on its public website. http://www.actuaries.asn.au/Library/Submissions/Superannuation/2016/010316IndirectCostsProductDashboards.pdf
Anything that can improve superannuation member engagement with their retirement savings can only be a good thing!