ING Direct has joined industry rivals Westpac and AMP in Australia’s low-cost retail superannuation space with the rollout of its Living Super product.
Launched yesterday by Financial Services and Superannuation Minister Bill Shorten, the product offers a balanced option to all Australians without administration or management fees.
“At the moment, Australians are paying on average about 100 to 120 basis points of their [balanced superannuation fund]. I think we can afford to put downward pressure on those fees,” Shorten said.
“That is why the government has engaged with such strong legislative change in the last 18 to 20 months promoting lower pressure on fees.
“We know that many Australians don’t have enough to retire on at the moment. The government has fought hard in the parliament to increase compulsory superannuation from 9 to 12 per cent. This is a policy that will stand the test of time.”
He said there was no point in Australians retiring “poorly”.
“Along with increasing compulsory savings from 9 to 12 per cent over the next seven years, we think it’s also incumbent for the superannuation system to be transparent, that it’s simple, that there is low fees and that people have confidence in the product,” he said.
He said with the government’s MySuper reforms, it would be possible for Australians to see if there was a balanced fund that was comparable on fees.
“We believe this will lead to downward pressure on fees and therefore more money in people’s retirement,” he said.
“We’ve noticed in the annual reports of large financial institutions who are in the superannuation space [that they] are all conceding that there will be less profit margin because some of that profit will be returned to superannuants and beneficiaries in the form of lower fees. That is why today with ING we are particularly pleased to see a product emerge on the market which actually in a certain category of fees there is no charge at all.”
ING Direct chief operating officer Anne Myers said the idea for Living Super stemmed from existing customers seeking greater control of their superannuation money.
“Control, transparency and fees are the issues for superannuation and it came through again and again in our research,” Myers said.
She said the product was designed to “suit all ages” and could be opened up from as young as 13, through to transition to retirement and into a pension.
The product, which lists State Street Global Advisers as its underlying investment manager, has a number of categories of investment – safe, smart, select and direct share trading.
Safe carries no fees and includes a range of cash and term deposits, whereas smart is the product’s balanced option and has 50 per cent equities investment and 50 per cent cash investment, also without fees.
Select offers a range of pre-mixed managed investments from high growth through to property funds. A low fee is charged for this option.
The product also offered online real-time share trading with the ASX 200, a range of exchange-traded funds, listed investment companies, and an opt-in option for insurance, Myers said.
Commenting on how ING Direct would see return on investment on the product’s balanced option when it offered no fee, she said the company used the cash raised in the 50 per cent cash investment to lend out to mortgages.
“So it’s the normal way banks make money, so you bring in deposits and then you lend out that money to mortgages,” she said.
AMP and Westpac already have low-cost super products in the market with AMP Flexible Super and BT Super For Life, respectively.
