Annual Outcomes Assessment 2022: Mercer Wesfarmers MySuper

We’ve assessed the performance of the Mercer Wesfarmers MySuper product and found 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.1 

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 Wesfarmers 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.

Stage 1

Factor 

Rating 

Investment returns

Members’ financial interests are promoted.

Investment returns, after deduction of all fees, costs and taxes, are above average over 1, 3 and 5 years for the majority of members compared to other super funds.

However, some members have received lower returns where we have designed investments to be less volatile.

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

Lifecycle stage

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

Quartile

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

Quartile

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

Quartile

1934 to 1938

10.77

Bottom quartile

6.04

Bottom quartile

6.10

Bottom quartile

1939 to 1943

10.67

Bottom quartile

5.90

Bottom quartile

6.04

Bottom quartile

1944 to 1948

10.77

Bottom quartile

5.86

Bottom quartile

5.95

Bottom quartile

1949 to 1953

11.06

Bottom quartile

5.94

Bottom quartile

6.19

Bottom quartile

1954 to 1958

13.41

Bottom quartile

6.70

Below Median

7.08

Below Median

1959 to 1963

16.17

Below Median

7.40

Below Median

7.97

Below Median

1964 to 1968

19.48

Above Median

8.37

Above Median

9.05

Top quartile

1969 to 1973

21.63

Top quartile

8.90

Top quartile

9.67

Top quartile

1974 to 1978

22.03

Top quartile

9.07

Top quartile

9.77

Top quartile

1979 to 1983

22.15

Top quartile

9.14

Top quartile

9.83

Top quartile

1984 to 1988

22.13

Top quartile

9.18

Top quartile

9.83

Top quartile

1989 to 1993

21.77

Top quartile

9.04

Top quartile

9.69

Top quartile

1994 to 1998

21.60

Top quartile

8.99

Top quartile

9.68

Top quartile

1999 to 2003

21.28

Above Median

8.77

Top quartile

9.40

Top quartile

When compared to all other single diversified and lifecycle stage MySuper options over 1, 3, and 5 year periods, net returns for pre glide cohorts for Mercer Wesfarmers MySuper rank above median or top quartile.

The rank of the returns reduces during the in glide and post glide cohorts. However, this is to be expected due to the nature of the de-risking strategy in the glidepath.

In order to better help MSAL determine whether post glide and in glide Mercer Wesfarmers MySuper cohorts are meeting members’ needs with respect to investment returns (net of fees and costs) taking account of risk, we have combined the Net Returns with Level of Investment Risk. The approach in the table below is to apply and compare growth asset allocation ranges as a measure of the level of investment risk.

Lifecycle stage

One-year quartile

Three-year quartile

Five-year quartile

1934 to 1938

Above Median

Top quartile

Top 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

Above Median

Top quartile

1964 to 1968

Top quartile

Top quartile

Top quartile

The risk-adjusted results band show that all post and in glide cohorts across 1, 3 and 5-year returns rank above median or top quartile when compared with other MySuper products of similar risk levels.  The returns are a strong indicator that the de-risking strategy and glidepath are performing well compared to other lifecycle products within the industry.

Investment risk

Members’ financial interests are promoted.

Consistent with the Mercer Wesfarmers MySuper investment strategy, the level of investment risk is higher relative to other MySuper products for younger members and lower for older members.

The table below shows the level of investment risk for Mercer Wesfarmers MySuper:

Lifecycle stage

Estimated number of negative net investment returns over a 20 year period

1929 to 1933

2.4

1934 to 1938

2.5

1939 to 1943

2.5

1944 to 1948

2.5

1949 to 1953

3.0

1954 to 1958

3.5

1959 to 1963

3.8

1964 to 1968

4.1

1969 to 1973

4.1

1974 to 1978

4.1

1979 to 1983

4.1

1984 to 1988

4.1

1989 to 1993

4.1

1994 to 1998

4.1

1999 to 2003

4.1

2004 to 2008

4.1

As the Mercer Wesfarmers MySuper cohorts de-risk from pre glide to post glide, the level of investment risk reduces accordingly.

This confirms that members of these cohorts are expected to have the downside risk protection envisaged by the lifecycle strategy of Mercer Wesfarmers MySuper.

Fees

Members’ financial interests are promoted.

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

Below are the Mercer Wesfarmers MySuper fees ranked against all other MySuper products:

Lifecycle stage

Fees (% p.a.)

Quartile

1929 to 1933

0.96

Above Median

1934 to 1938

0.94

Above Median

1939 to 1943

0.94

Above Median

1944 to 1948

0.98

Above Median

1949 to 1953

0.99

Above Median

1954 to 1958

0.97

Above Median

1959 to 1963

1.03

Above Median

1964 to 1968

1.06

Below Median

1969 to 1973

1.05

Below Median

1974 to 1978

1.05

Below Median

1979 to 1983

1.06

Below Median

1984 to 1988

1.05

Below Median

1989 to 1993

1.09

Below Median

1994 to 1998

1.09

Below Median

1999 to 2003

1.09

Below Median

2004 to 2008

1.09

Below Median

The per annum fees for each Wesfarmers 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 52 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 -103.

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 Act4, We 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 that the Death and TPD and IP offerings compared favourably with competitors. Furthermore our products were rated 5 out of 5 by Chant West2.

Subsequently we determined that our Insurance strategy supports member needs.

Insurances 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 Wesfarmers 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 Wesfarmers 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 Wesfarmers 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.

Fee structure


Members’ financial interests are promoted.

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

 

1 SIS Act section 52 (9)

2 Chant West Member Outcomes Dashboard 30 June 2021

3 The Evolved Group 2020

4 APRA Prudential Standard SPS 250 Insurance in Superannuation