Annual Outcomes Assessment 2022: Mercer Tailored (CRG) MySuper

We’ve assessed the performance of Mercer Coles MySuper and determined that it’s promoting the financial interests of our members.

Each year Mercer Super is required to assess our performance against other super products and determine whether our products promote the financial interests of our members1.

The annual assessment is split into three  stages – two comparative assessment stages as applied for the 2020 assessments, and a further stage which considers the results of the annual APRA Performance Test. For the two comparative assessment stages, the Trustee is required to:

  • decide on the weighting of the comparative assessment stages when making its determination – The Trustee has decided to place equal weighting on both comparative assessment stages; and
  • identify the other super products used to undertake the comparison – noting that the Mercer Santos MySuper product is a MySuper product, the Trustee has decided to perform comparative assessments against all MySuper products in the market.

We’ve assessed the performance of Mercer Coles MySuper and determined that it’s promoting the financial interests of our members as at 30 June 2021 based on the factors detailed in the below table. 

Both comparative assessment stages examine results based on different factors. We summarise the assessment of each factor in the table below. Green indicates it is clear financial interests are promoted, amber indicates financial interests are mostly promoted, and red indicates that further improvement is required to ensure financial interests are promoted.

Stage 1

Factor 

Rating 

Net Investment returns2

Members’ financial interests are promoted.

When compared to all other single diversified and lifecycle stage MySuper options3 over 3 and 5 year periods, all net returns for pre glide cohorts for Mercer Coles MySuper rank above median or top quartile.

The Coles demerger from Wesfarmers for superannuation purposes was only completed in 2019, so the Mercer Coles MySuper product only has a 1-year investment history to 30 June 2021.

However, given the product replicates the Wesfarmers MySuper product (same investment strategy at the same fees), MSAL is able to use the net return analysis for the Wesfarmers MySuper product over 3 and 5-year periods as a proxy stage 1 net return assessment for the Mercer Coles MySuper product.

Comparative net returns over the 1, 3 and 5 year periods have been as follows:

Lifecycle stage4

1-year net return (% p.a.)

Quartile

3-year net return (% p.a.)

Quartile

5-year net return (% p.a.)

Quartile

Stage of glide path5<

1939 to 1943

10.67

Bottom quartile

5.90

Bottom quartile

6.04

Bottom quartile

Post glide

1944 to 1948

10.77

Bottom quartile

5.86

Bottom quartile

5.95

Bottom quartile

Post glide

1949 to 1953

11.06

Bottom quartile

5.94

Bottom quartile

6.19

Bottom quartile

Post glide

1954 to 1958

13.41

Bottom quartile

6.70

Below Median

7.08

Below Median

In glide

1959 to 1963

16.17

Below Median

7.40

Below Median

7.97

Below Median

In glide

1964 to 1968

19.48

Above Median

8.37

Above Median

9.05

Top quartile

In glide

1969 to 1973

21.63

Top quartile

8.90

Top quartile

9.67

Top quartile

Pre glide

1974 to 1978

22.03

Top quartile

9.07

Top quartile

9.77

Top quartile

Pre glide

1979 to 1983

22.15

Top quartile

9.14

Top quartile

9.83

Top quartile

Pre glide

1984 to 1988

22.13

Top quartile

9.18

Top quartile

9.83

Top quartile

Pre glide

1989 to 1993

21.77

Top quartile

9.04

Top quartile

9.69

Top quartile

Pre glide

1994 to 1998

21.60

Top quartile

8.99

Top quartile

9.68

Top quartile

Pre glide

1999 to 2003

21.28

Above Median

8.77

Top quartile

9.40

Top quartile

Pre glide

Over all periods, the rank of the Mercer Coles MySuper net returns reduces from above median/top quartile to bottom quartile for the in glide and post glide cohorts. This is due to the nature of the de-risking strategy in the glidepath. The in glide and post glide cohorts have an increasingly reduced proportion of assets invested in growth type asset classes as members age, consistent with the primary focus on reducing downside risk for cohort members (see analysis of level of investment risk below).

In order to better help us determine whether in glide and post glide Mercer Coles MySuper cohorts are promoting members’ interests, we have considered net returns taking account of risk. For each post glide and in glide cohort, we have measured the level of investment risk based on the allocation to growth assets. We then combined the net returns with the level of investment risk to determine risk-adjusted net returns, which were then compared with all MySuper products6. Results from the comparative assessment are shown in the table below.

Lifecycle stage

1-year net return quartile

3-year  net return quartile

5-year  net return quartile

1939 to 1943

Above Median

Top quartile

Top quartile

1944 to 1948

Above Median

Top quartile

Top quartile

1949 to 1953

Top quartile

Top quartile

Top quartile

1954 to 1958

Above Median

Top quartile

Top quartile

1959 to 1963

Above Median

Top quartile

Top quartile

1964 to 1968

Top quartile

Above Median

Top quartile

The results by growth allocation % band show that all pre and in glide cohorts (33% of Mercer Coles MySuper assets) across 1, 3 and 5-year returns rank above median or top quartile when compared against products with similar risk levels. The lifecycle stages in the range 1969 to 2008 make up the remaining 67% of Mercer Coles MySuper assets, and have delivered above median to top quartile performance across all periods. Overall when the performance of each lifecycle stage is weighted based on the value of assets, members’ financial interests are promoted.

Investment risk


Members’ financial interests are promoted.

Compared with other MySuper products the level of investment risk in Mercer Coles MySuper is below median to bottom quartile.

The level of investment risk for each lifecycle stage of Mercer Coles MySuper has been determined by estimating the number of negative net investment returns over a 20 year period. The results have then been ranked against all MySuper products.

Out of 398 MySuper products, Mercer Coles MySuper ranks 7 ;as follows (with 1st representing the MySuper product with the highest level of investment risk):

  • Pre glide: 200th;
  • In glide: 200th – 288th; and
  • Post glide: 333rd – 376th

Overall, members’ financial interests are promoted as Mercer Coles MySuper does not expose members to significantly higher levels of investment risk when compared with all MySuper products.

Fees


Members’ financial interests are promoted.

The fees for Mercer Coles MySuper members are below average, with older members having some of the least expensive fees when compared to all other MySuper products at 30 June 2021.

The per annum fees for each Coles MySuper product lifecycle stage rank above median (less expensive) for older members and reduce to below median for younger members when compared to all single diversified and lifecycle stage MySuper options.

The difference between the fees by cohort is primarily due to the level and type of growth assets in each cohort. The lifecycle stages for younger cohorts have a larger proportion of growth type assets and so have higher investment management fees.

Stage 2

Factor

Rating

Options, benefits and facilities


Members’ financial interests are promoted.

The trustee assessed the appropriateness of the options, benefits and facilities in the Mercer Super Trust (MST) in February 2021, considering member outcomes, member services, and any subsequent actions to improve the MST service offering. The assessment was that the options, benefits and facilities provided in the MST provide significant value for members.

Further to this, the Chant West member outcomes dashboard rated MST 5 out of 5for quality of Member Services and Member Engagement.

Member Services rated top 3 in 2020 by Chant West compared to all other retail and industry funds.

MST also achieved an overall Net Promoter Score of +13 compared with the industry average of -109.

Investment strategy


Members’ financial interests are promoted.

An annual review of investments is completed and small adjustments made to the investment strategy to improve member outcomes.

Overall, the Trustee is comfortable that the annual review process ensures each investment strategy:

  • has appropriate objectives to deliver to strategy;
  • is appropriately diversified,
  • has sufficient liquidity, and

thereby ensuring each investment strategy continues to promote members’ financial interests.

Insurance strategy


Members’ financial interests are promoted.

In accordance with the SIS Act10, we have used the Insurance Management Framework to assess the appropriateness of the Insurance Strategy.

We commissioned an insurance benchmarking report to compare our insurance design to our competitors. The key findings of the report were the death and TPD and IP offerings compared favourably with competitors. Further more our products were rated 5 out of 5 by Chant West8. Subsequently we determined that our Insurance strategy supports member needs.

Insurances Fees


Members’ financial interest are promoted.

Again, using the Insurance Management Framework to assess the appropriateness of Insurance Fees, we determined that the insurance fees charged in relation to Mercer Coles MySuper do not inappropriately erode the retirement income of members.

Scale


Members’ financial interest are promoted.

In determining scale, and whether the scale of MSAL’s operations disadvantages the financial interests of beneficiaries in a particular product, we separately analysed Coles MySuper against five scale assessment perspectives:

  1. Operational scale
  2. Impact on investment strategy
  3. Bargaining power with service providers
  4. Staffing
  5. Risk pooling.

Three categories determined the scale was optimised and the remaining two determined that scale was obtained, however could be improved on in the future.

Additionally, based on analysis of the APRA annual fund-level superannuation statistics as at 30 June 2021, MSAL ranked 18th (of all APRA regulated funds with more than four members respectively) for number of member accounts and total assets. Both results are top quartile and thus providing strong scale opportunities for members. Although this annual outcomes assessment is for Coles MySuper specifically, the product benefits from the full scale of MSAL’s operations and therefore the comparison has been completed at RSE level.

Operating cost


Members’ financial interests are promoted.

MSAL outsources all of the functions required to operate the MST in an efficient and effective manner. Therefore, how the operating costs of the MST affect members’ financial interests depends largely on the costs MSAL pays to its service providers.

The service providers have contracts that are negotiated regularly and benchmarked to other potential providers. 

Fee structure


Members’ financial interests are promoted.

MSAL annually assesses the appropriateness of the fees charged to Coles MySuper beneficiaries. The assessment considers; Attribution of costs, Fee discounts or rebates, the structure of the fees charged, fee comparison to comparable products.  The most recent assessment determined that Administration Fees, Investment Fees and Shared Costs were appropriate for Coles MySuper members.

 

1 SIS Act section 52 (9)

2The Coles demerger from Wesfarmers for superannuation purposes was only completed in 2019, so the Coles MySuper product only has a 1-year investment history to 30 June 2021. However, given the product replicates the Wesfarmers MySuper product (same investment strategy at the same fees), MSAL is able to use the net return analysis for the Wesfarmers MySuper product over 3 and 5-year periods as a proxy stage 1 net return assessment for the Coles MySuper product.

3APRA Quarterly MySuper statistics September 2019 - September 2021

4Currently no members are invested in the 1929 to 1933, 1934 to 1938 or 2004 to 2008 cohorts.

5Mercer Coles MySuper automatically reduces your exposure to growth assets as you get closer to retirement – we refer to this process as ‘gliding’. Younger members who have not seen any reduction in growth assets are classed as ‘pre-glide’, members who have seen some reduction in growth assets are classed as “in glide” and members who have had their growth assets reduced to the minimum amount are classed as “post-glide”.

6APRA Quarterly MySuper statistics: September 2019 - September 2021

7APRA Quarterly MySuper statistics: September 2019 - September 2021

8Chant West Member Outcomes Dashboard 30 June 2021

9 The Evolved Group 2020

10 APRA Prudential Standard SPS 250 Insurance in Superannuation