The pricing of industry superannuation funds has blown out to converge on a new retail price point that contradicts the commonly held notion that they are the most cost-effective retirement savings vehicle, according to research by Tria Investment Partners.
The data shows that industry funds charged fees of 66 basis points on a member balance of $50,000 in 2004. However, this figure increased to 101 basis points in 2009, therefore running into a new retail price point.
In contrast, the study also indicated that the retail industry and platform providers have cut cost structures and established a new price point.
In 2009, the new generation retail price point ended up at 103 basis points.
“I think the only thing you can say here is ‘oops’. I put it to you that this is not a good thing. This is a real problem and it’s really quite a serious strategic mistake to have made. We’ve got here quite rapid price increases from a segmented market that is positioned on price,” Tria Investment Partners managing partner Andrew Baker told delegates at the annual Wraps, Platforms and Masterfunds conference last week.
“Corporate master trusts have been very competitive for a long period of time, but this new price point which we see being dropped in is about 100 basis points.
“From our point of view, we’ve got some really interesting things going on in the market. It is absolutely game on.”
Baker said the new retail price point being dropped in the market is very competitive.
“There has been a loss of cost discipline through the major competitor, which allows many more angles to be pursued,” he said.
Baker said this also created some serious difficulties with the industry fund’s fundamental value proposition.
