Vanguard Super?

Hi Scott

I came across an article stating that Vanguard is now in the Superannuation business and will be competing against the likes of Australian Super, HostPlus etc. What is your view on this?

Andrew

Hi Andrew

Yes, this week Vanguard officially launched their super fund offering.

They’re charging 0.58% per annum, which is one of the lowest in the market for standard default funds with balances under $50,000.

There are cheaper superannuation index funds available.

Yet here’s what’s interesting about this:

First, Vanguard has said they’ll look to lower their fees over time as they grow. I’m inclined to believe them, because that’s what they have a history of doing.

Second, this ain’t your bog-average super fund.

Research from SuperRatings found there is a “high risk at retirement” for many of the current top-returning super funds. That’s because most of our biggest super funds throw everyone – young and old – into a one-size-fits-all investment pot.

Instead, Vanguard’s offering is a life cycle fund that invests your super based on your age. In simple terms, they automatically reduce the amount of riskier assets, like shares, in your portfolio as you get older and closer to retirement. In all, they make 36 of these adjustments up to your 83rd birthday (with no switching fees), which is far and away the most comprehensive of any Australian super offering.

So what do I think?

I think this is great news for every Australian – regardless of whether you switch to Vanguard or not.

The super fund industry trousers an outrageous $30 billion a year in fees – money that could and should be going towards our retirement.

Hopefully now that one of the world’s biggest fund managers – with a relentless focus on lowering costs – has set up shop, they’ll keep everyone on their toes.

For disclosure, I invest in some Vanguard index funds.

Scott.