In its submission, Mercer said many funds have only had a MySuper offering in place since 1 January 2014 and that a number of Stronger Super initiatives which accompany MySuper have not yet been implemented.
Mercer said the reduction in fees for super products may not be entirely apparent from publicly available information for a number of reasons, including the fact that published fees in many cases include operational risk levies, which is a new legislative requirement.
Mercer said that in the short term, MySuper providers have also had to bear significant costs resulting from legislative changes which ultimately in most cases are passed on to members.
“Published information does not reflect the much lower fees often applicable in tailored MySuper products and corporate discounts in other MySuper products, where competition has been intense,” said Mercer.
Mercer also criticised some of the comparisons regarding fees made between the Australian superannuation system and pension systems in other countries, by organisations such as the Grattan Institute and Treasury.
The underlying data in these comparisons, Mercer said, does not highlight the significant differences in the structure of the retirement system in each country.
Mercer said factors such as a higher exposure to actively managed equities, a strong but costly regulatory regime, the requirement for funds to calculate and pay a range of taxes and provide a death and disability insurance could all be contributing to the fees in the Australian super system appearing to be higher.
The large size of the SMSF sector, Mercer said, also means the average account balances in other funds are lower than they would otherwise be, meaning dollar-based fees represent a higher percentage of the average account balance.
“Whilst there may be scope to continue to reduce costs and therefore fees in the Australian superannuation system, it should be noted there are some features in the system that are not replicated anywhere else in the world,” said Mercer.
“It is a system with extensive choice, very strong regulation, an extremely complex taxation system and compulsory insurance.”
Mercer said it is important that the MySuper legislative framework be given enough time to properly make a judgement on whether it has been a success.
“We believe any changes to MySuper should, in the short term, be limited to minor improvements to the existing system rather than revolutionary change,” Mercer said.
