Hostplus has started a new price war that will reset the definition of low-cost super products in the industry.
Next month, the super fund will launch a fully indexed balance fund option at a management fee of just 3.6 basis points plus a membership fee of $1.50 a week.
For a member with an account balance of $50,000, the total cost of the option would come down to $96 a year or 19 basis points.
The move should not be seen as Hostplus' reaction to MySuper, but more to the increasing competition for low-cost super options.
"We certainly have seen a number of our retail competitors successfully promote their index options as low-cost options," Hostplus chief executive David Elia said.
"From my perspective, it is not necessarily true to say that their options are in fact cheap options," he said.
Elia took aim at AMP Flexible Super, which in its basic version is also a fully indexed product.
"In our view, if members truly want cheap, index-style investment options, let's give it to them. But more importantly, let's make sure they are in fact low cost," Elia said.
Elia said Hostplus is able to offer this product because it does not make a profit on its management fees in the new product.
"There are no margins attached to our underlying investment fee. Whatever we pay our underlying managers we pass on," Elia said.
AMP Flexible Super charges in its most simple form, the core balanced index option, about $403 a year.
But an AMP spokesperson rejected the notion that the indexed option of AMP Flexible Super was expensive.
"AMP Flexible Super Core, which is our default fund, is competitively priced and charges the lowest fees compared to the average top 10 industry funds, the average top 10 retail competitors' key products, as well as index options," the spokesperson said.
"We have been very pleased with the success of AMP Flexible Super since its launch in May - it now has $1 billion in funds under management and the feedback from customers and planners on the product has been very positive."
AMP did not fear the competition from the new Hostplus product.
"Competition is a good thing as it means greater choice and better value for customers and will ultimately deliver better retirement outcomes for Australians," the spokesperson said.
The new Hostplus fund is also almost half the price of the cheapest industry balanced fund out there. First State Super's balanced option charges an overall fee of 37 basis points.
However, the fund is currently in the process of merging with Health Super and this could spark a review of prices, First State Super chief executive Michael Dwyer said in an earlier interview with Investor Weekly.
The Hostplus indexed balanced option has an allocation of 42 per cent to Australian equities, 33 per cent to international equities, 10 per cent to Australian fixed income, 10 per cent to international fixed income and 5 per cent in cash.
It is set up as a multi-manager fund, similar to existing Hostplus options.
Australian equities are managed by Industry Funds Management's enhanced Australian index strategy.
International equities are managed by the BlackRock Fission Indexed International Equity strategy, while BlackRock also manages the international fixed interest mandate.
Australian fixed interest is handled by Macquarie True Index, and ING Treasury manages the cash allocation.
