MySuper the lowest common denominator

Amid all the discussion around last week’s release of the Government’s Stonger Super package, there existed the strong assumption that low-cost, low-fee MySuper products would emerge to dominate the superannuation landscape.

That assumption was based in large part on the same thinking which actually drove the Cooper Review to recommend the creation of MySuper as a form of universal default – that most Australians are so disengaged from their superannuation that they need to be placed into a product specifically designed to protect them from their own disinterest.

It is worth reflecting that the Cooper Review’s embrace of MySuper ran completely counter to more than a decade of effort on the part of the Australian financial services industry to encourage Australians to actually engage with their superannuation and to make appropriately informed decisions.

Notwithstanding the Government’s decision to embrace MySuper as the central pillar of its Stronger Super push, the financial services industry would be wrong to meekly accept that disengagement from superannuation should be accepted as a norm.

Indeed, any examination of the package released by the Assistant Treasurer, Bill Shorten, last week should give heart to the major financial institutions that a genuine opportunity exists to keep encouraging Australians to become engaged in their superannuation and to offer them products which actually encourage such engagement.

In circumstances where MySuper products will be predicated on a “single, diversified investment strategy”, there exists substantial scope for funds to attract the attention of the supposedly disengaged by rewarding members with significant out-performance. There exists abundant evidence within the financial services industry, from sources as diverse as Roy Morgan Research to the Superannuation Complaints Tribunal, that the number one concern of superannuation fund members is the investment returns they ultimately receive.

Of course the make-up of a “single, diversified investment strategy” can mean different things to different people, but those members sitting within low-cost MySuper products may not be feeling too sanguine if their returns are persistently lower than the industry average.

There has been much discussion within the superannuation industry of the risk that MySuper may precipitate a “race to the bottom”. The Government’s Stronger Super blueprint has not, as yet, given reason to believe this might not happen.

MySuper should therefore be regarded for what it is – a lowest common denominator – and the financial services industry should get on with the job of offering consumers a better range of options.