‘Transparent and competitive’: Vanguard Super launches with low-fee products

After years in the making, Vanguard has finally launched its much-anticipated super fund.

It’s a cornerstone move for the fund that started in the US 47 years ago in the 401(k) retirement savings market, opening its doors in Australia 14 years later.

The fund is offering an accumulation product Vanguard Super SaveSmart which includes a MySuper default fund called Lifecyle as well as a range of index-based diversified and single sector investments options.

The aim is to deliver a low-cost, high-quality super fund that includes a default offer designed to move with them right through life.

Vanguard claims its 58bps yearly fee for the default option represents the lowest in the superannuation market for member balances under $50,000 for members aged 47 and under.

The fund announced the November launch a few months ago after the prudential regulator granted a registrable superannuation entity licence.

Broad representation

Competitors are expecting the firm could pick up four to eight per cent of the $3.4 trillion superannuation market, particularly members who are invested in passive indexed options.

Vanguard Australia head of superannuation Michael Lovett tells Investment Magazine the fund wants to have broad representation across many market segments.

“We want to be one of the larger providers of superannuation in the market over the next five to 10 years,” he says.

Vanguard’s default Lifecycle option adjusts asset allocation according to the member’s age. It adjusts 36 times over the course of a member’s life from the age of 47 to 82, compared to the industry average of four to five adjustments.

Lifecycle members aged 47 and under are invested in a diversified portfolio with a higher allocation to growth assets. From age 48, the Lifecycle investment undergoes a series of annual changes reducing the allocation to growth assets, while increasing the allocation to defensive assets.

From age 82 onwards, the asset allocation is designed to have a greater emphasis on reduced risk to shield retirement savings from the impacts of volatility.

“We are bringing a best in class thinking in a lifecycle which has 36 cohorts,” Lovett says. “Those cohorts are automatically re-balanced every year from age 47 all the way to 82 so we think this is really personalised investment approach.”

The fund is also working to launch a pension product by the middle of next year, says Lovett.

More in the works

Vanguard is planning to launch a portal in the next few months for advisers to manage client accounts for both non-superannuation investment accounts and super accounts.

Members will similarly be able to have a “whole of wealth” view with a single point of access to their Vanguard Super investments and investments outside super.

“Vanguard has been ultra-successful in running indexed assets but we also have active assets both in Australia and the US… We are aiming to compete with the industry funds and the retail funds in their core offerings,” he says.

Vanguard will also release a broader retirement study later this year which claims that half of Australians are unsure about the fees they pay to their super fund and two in five are unsure if their fund is low cost.

Vanguard Australia managing director Daniel Shrimski said the fees are deliberately structured to be “transparent and competitive”.

“The fund’s fees are presented on a yearly fee basis which incorporates the investment cost, administration fee and transaction costs,” Shrimski said in a media release announcing the launch.

Vanguard Super investment menu and yearly fees

*The yearly fee amount includes the fund investment fee, administration fee and transaction cost and excludes activity fees and insurance premiums. Source: Vanguard.