Annual Outcomes Assessment 2022: Mercer Santos MySuper

We’ve assessed the performance of the Mercer Santos 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 members.

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 the Mercer Santos MySuper product 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.

Factor

Rating

Stage 1

Net Investment returns

Members’ financial interests are promoted.

Investment returns, after deduction of all fees and taxes, are above average compared to other super funds over 5 years for all members while 1 and 3 year returns were slightly below average given a significant allocation to growth assets.

The below table shows Mercer Santos MySuper net returns over one, three, and five years, along with how those returns compared to all other MySuper products2.

Period

Return (% p.a.)

Quartile

Median (% p.a.)

1-year

17.38

Below Median

 

17.94

3-year annualised

7.59

Below Median

 

7.70

5-year annualised

8.16

Above Median

8.05

 

Investment risk

Members’ financial interests are promoted.

The level of investment risk of the Mercer Santos MySuper product is below average and compares favourably to all other MySuper products.

The level of investment risk for each lifecycle stage of Mercer Santos 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.

The estimated number of negative net investment returns over a 20-year period for the product is 3.6 years. This ranks 281st out of the 398 products and below the median level of risk (4.1 years) compared to all other products. This is a very strong result taking into account that the members have had above median net returns over 5-years in the analysis.

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

Fees

Members’ financial interests are promoted.

Total fees and costs of the Mercer Santos MySuper product are below average when compared to all other MySuper products.

The Mercer Santos MySuper product has fees of 0.87% per annum, ranked 338 (top quartile) with top quartile fees and costs (i.e. amongst the least expensive) compared to all 398 single diversified and lifecycle stage MySuper products at 30 June 2021.

This result shows that the product is not disadvantaging member outcomes from a fees perspective.

Stage 2

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 53 for 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 -104.

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 Act5, we have used the Insurance Management Framework to assess the appropriateness of the Insurance Strategy.

An insurance benchmarking report was commissioned 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. Furthermore our products were rated 5 out of 5 by Chant West3. Subsequently we determined that our Insurance strategy supports member needs.

Insurance fees

Members’ financial interests 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 Santos MySuper do not inappropriately erode the retirement income of members.

Scale

Members’ financial interests 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 the Mercer Santos MySuper Product 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 the Mercer Santos MySuper Product 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.

Fees structure

Members’ financial interests are promoted.

MSAL annually assesses the appropriateness of the fees charged to Mercer Santos MySuper Product 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 Mercer Santos MySuper Product members.

 

1 SIS Act section 52 (9)

2 APRA Quarterly MySuper statistics September 2019 - September 2021

3 Chant West Member Outcomes Dashboar d 30 June 2021

4 The Evolved Group 2020

5 APRA Prudential Standard SPS 250 Insurance in Superannuation