What are the details of a “MySuper” product?

13/10/2011

Essentially, the “MySuper” changes, based upon the Exposure Draft, are:

• Only APRA Iicensed trustees will be permitted to offer super interests which will qualify as a “MySuper” product
• APRA licensed trustees wishing to offer “MySuper” products will have to be specifically authorised by APRA and the authorisation will be included as a license condition
• There is to be only one investment strategy for each “MySuper” product which must be a diversified strategy
• All SG contributions made to a trustee offering a “MySuper” product must be paid to that product (unless the member has made a fund choice decision for another product issued from that fund)
• All investors in the “MySuper” product must have access to the same options, benefits and facilities (this includes access to call centres, member education, intra-fund advice etc)
• There can be no discrimination between investors in “MySuper” products as to investment earnings or sources of investment earnings
• The types and amounts of fees which can be changed in a “MySuper” product will be limited and generally cannot be offered on a discriminatory basis
• A “MySuper” product will not be permitted to pay commissions
• A member can only transfer out of a “MySuper” product either at their request/consent or the transfer is to another “MySuper” product.

Importantly, a “MySuper” product is intended to operate only in the accumulation phase of super and not the drawdown phase.  In short, a “MySuper” product cannot offer a retirement pension.  An investor in a “MySuper” product who wishes to commence a pension (eg a transition to retirement pension or an ordinary account-based pension) must transfer out to a non-“MySuper” product.

A number of important concessions will apply to “MySuper” products:

• The strictness of the “single investment strategy” requirement is modified by the “lifecycle investment strategy” exception.  This exception permits income from different classes of asset of the fund to be streamed to the accounts of different class of members solely on the basis of the age of the member.  
• The strictness of the “no discrimination” requirement in relation to fees will be modified in relation to administration fees where a single employer negotiates a discounted administration fee.  The operation of this discounting exception will be subject to strict controls.  Further, employers may by paying additional contributions, effectively offset the fees charged to members.  However, any employer subsidisation must apply equally to all of the employees of the employer participating in the “MySuper” product.
• The strictness of the one “MySuper” product per fund rule will be modified where a trustee has an existing “branded super product” which they wish to maintain while converting it into a “MySuper” product or where a trustee acquires a separately branded “MySuper” product by reason of mergers or takeovers.
• A trustee can offer a tailored “MySuper” product to an employer so long as the employer contributes for at least 500 members who are employees (including employees of associated entities).  However, given the concession in respect of discounted administration fees, the tailored product concession is unlikely to be offered.