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Vanguard Shakes Up Aussie Superannuations — Offers New Fund

By Will Ellis
Last Updated on December 19, 2022

The Australian superannuation market is being shaken up by a new operator that claims to provide a low-cost service, but critics have already pointed out a serious issue.

For Australians under 47, a new low-fee superannuation plan has just been introduced by a multi-trillion dollar worldwide firm.

Vanguard made its entry into the Australian superannuation sector on Friday.

The firm boasts that its 0.58 per cent annual investment and administrative costs are the lowest in the super category.

“On a $50,000 balance, that’s $290,” said Vanguard (who we’ve recommended for a diverse array of long-term investments, such as scoring them #1 for REITs). Which is among the lowest rates available. We make things easy by discussing our administrative, investment, and transaction fees and charges as a single annual fee, according to Vanguard.

Claims and Criticisms

For participants with deposits under $50k and those under the age of 47, Vanguard said that the cost was the “lowest in the Australian superannuation industry.”

“We aim to bring clients a reduced-cost, strong super fund that incorporates a baseline offer tailored to grow alongside them throughout a lifetime,” said Daniel Shrimski, managing director of the company’s Australian business.

Although the fund has just been launched, experts are already criticising it.

According to Craig Swanger, formerly a director of investment at Macquarie, “Vanguard Super is not the least expensive super fund for everyone.”

If employees are placed into a preset fund that is governed by the state, he noted, it is on the more affordable end of the scale for MySuper alternatives.

There really are funds, meanwhile, that don’t appear on the MySuper list yet provide customers with superior rates.

According to him, there are several “preferred” index (i.e., non-MySuper) funds available on the market that have an identical or comparable asset allocation.

The Barefoot Investor’s creator, Australian author Scott Pape, also discussed the problems with the firm’s audacious claim.

He wrote in an email that “there are less expensive superannuation index products accessible.”

In addition, he noted that Vanguard had stated that as they expanded, they would try to cut their costs. They have a record of doing it, so I’m more inclined to trust them.

Aussies also complained about the rate on Reddit, claiming it was far more than they had anticipated given the fund’s claim to be a low-fee one.

It comes after statistics from Super Consumers Australia revealed last month revealed that the new superannuation performance standard instituted by the Australian Prudential Regulation Authority (APRA) had an effect on the number of administrative expenses paid to Australians.

The success grade is made up of two parts: investing performance and super fund expenses and fees.

While the worst violators reduced member prices, highest-performance funds actually increased their fees.

The company discovered that funds that just missed passing the benchmarking tool last year had reduced costs by 5.7%, while those that did not pass had decreased fees by an average of 20.6%.

Superannuation Sector

A corporation creates a super, an Australian pension plan, for the sake of its workers. Until retirement or fund withdrawals, money put in a superannuation fund will increase via appreciation and payments.

The word “super” is much more frequently used to describe the retirement options offered in Australia. Defined-benefit or defined-contribution plans are the American equivalents of superannuation plans.

After the FTX crisis and the crypto winter affair, which saw major cryptos plummet in value, investors worldwide are looking for trustworthy means of parking their cash into retirement. The super fund sector is one such possibility. 

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