Super funds should be adjusting their MySuper products based on age and projected account balance rather than ‘dumping’ all members into the same default fund, says Trustee Tailored Super.
The Financial Services Council has released a joint report with Tailored Superannuation Solutions Ltd, a start-up that is hoping to capitalise on the government's review of default superannuation.
The report makes the case for 'smart' default funds that are tailored to factors such as member age, account balance, projected account balance at retirement and gender.
Trustee Tailored Super is the brainchild of former HSBC treasury credit head and APRA manager Douglas Bucknell, who has been working on the idea of 'next generation' life-cycle funds since the inception of MySuper.
"I believe it is really inefficient and inappropriate for [super] trustees to simply dump their members in the same investment option regardless of whether they're going to retire on $100,000 and the age pension or $1.6 million," Mr Bucknell said.
"There's got to be a more efficient way of doing that, and in fact funds know that themselves because they tell their Choice members to choose investment options based on their projected retirement outcome and based on how long it is until they retire."
Trustee Tailored Super has made submissions to the Productivity Commission's inquiry into default superannuation, and the start-up is fully supportive of the government's recent moves to empower APRA to remove inefficient funds from the industry, Mr Bucknell said.
The problem is that super fund trustees have not been incentivised to improve their default fund options, he said – and that is unlikely to happen until APRA can "put the pressure" on less efficient funds.
"We think we have the solution and it's capable of being implemented today by trustees – it's just that trustees at the moment have been somewhat complacent and there hasn't been sufficient competition for that to occur," Mr Bucknell said.
Industry Super Australia public affairs director Matt Linden was dismissive of the joint FSC/Trustee Tailored Super report, labelling it a "marketing brochure masquerading as research".
"The lack of any evidence pointing to investment outperformance of choice super products has seen the authors resorting to making hypothetical performance claims about hypothetical products," Mr Linden told InvestorDaily.
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