Vanguard launched its long-awaited tilt at the A$3 trillion plus Australian superannuation market last week touting an all-in annual fee of 0.58 per cent for its default option.
The index behemoth flagged the move almost three years ago, ditching about A$100 billion of institutional client money across Australia and NZ in 2020 ahead of the retail super grab.
In a release last Friday, Vanguard Australia chief, Daniel Shrimski, said the super SaveSmart range “combines real simplicity with smart, global investment expertise”.
“We want to deliver members a low-cost, high-quality super fund that includes a default offer designed to move with them right through life,” Shrimski said.
Low by Australian standards, the Vanguard super fee is almost three-times the cost of the cheapest KiwiSaver fund – the SmartShares default option priced at 0.2 per cent. The Simplicity KiwiSaver scheme, which invests largely in Australia-domiciled Vanguard funds, also boasts a headline fee of 0.31 per cent with several others also under the 0.58 per cent level.
Shrimski said the average comparable Australian super fund annual fee is about 1 per cent.
As well as a default lifecycle option, the new Vanguard super suite includes five diversified funds and six single-sector options costing between 0.39 per cent (for cash) and 0.58 per cent.
More than half of the default Vanguard fee covers administration costs of 0.35 per cent while investment (0.21 per cent) and transaction (0.02 per cent) expenses take up the remainder.
Vanguard waives most of the admin fee on the portion of super fund balances above A$850,000. For member accounts under A$6,000 the manager will cap the combined admin-investment fees at 3 per cent of the total balance.
However, Vanguard super fund members may also be charged buy/sell spreads and life insurance premiums.
The group plans to add a pension option and adviser platform soon, Shrimski said.
“As the first new entrant into the Australian superannuation industry in years to gain an RSE [responsible entity] licence, and launching despite industry consolidation, we’re here because we truly believe we can improve retirement outcomes for Australians and be a catalyst for much needed change in the industry,” he said.
Shrimski told media that Vanguard’s cancelled its Australia and NZ institutional business – a call that saw several bank-owned KiwiSaver schemes, notably ANZ, scramble to fill the index vacancy with other providers – to clear the decks for the super scheme.
“We were managing superannuation money and we don’t want to have a separate super fund that sits in between us and that client,” he said. “We want to be that super fund.”
Vanguard already has about 90,000 direct Australian clients on its existing investment platform and has fielded 20,000 enquiries for the new super product, Shrimski said.
He said the group might also consider buy-outs in an Australian super market now hot with merger-and-acquisition activity.
“As opportunities arise, we’ll certainly look at them,” Shrimski told press.
After the institutional divorce, the now $5 billion plus Simplicity is Vanguard’s largest NZ client via holdings in several Australian unit trusts.
However, it is understood Simplicity is mulling options to create more tax-effective NZ-domiciled funds that may see a change of underlying manager.
In a social media post, a Simplicity spokesperson said in September: “I expect to have made significant progress by the end of September. Our intention is to complete the change this calendar year if possible; certainly by the end of our financial year – 31 March 2023.”