Australia launches superannuation reform: MySuper to strip A$2.7 billion in fees a year

(Editor’s note: this report was originally in English and is rewritten in Chinese per this site’s practice.)

The federal government has unveiled reforms to Australia’s A$1.3 trillion superannuation industry, responding to the Cooper review with high management fees squarely in its sights: a simple, low-fee default product called MySuper, plus forced back-office modernisation to cut costs further. The government estimates the measures will strip A$2.7 billion in fees out of the industry every year over the long term.

What are the key reforms?

MySuper plus consolidation pressure on small funds. Assistant Treasurer Bill Shorten said funds won’t be compelled to merge, but the reforms are expected to force smaller funds together and trigger industry consolidation: “There are benefits of scale which go towards lowering of costs. We hope our reforms will encourage superannuation funds to contemplate mergers.” Australia has the world’s fourth-largest funds market, yet no individual fund ranks in the global top 25. The changes will also make greater use of personal tax file numbers to help workers track savings — today, changing jobs often means changing funds, leaving billions in lost accounts; the new system makes consolidation into one account easier.

How much will workers save?

0.4% a year in lower fees — A$40,000 over a lifetime for a 30-year-old. The reforms are expected to cut member fees by 0.4 percentage points annually: for a 30-year-old on average wages, that means A$40,000 extra over a working life. The biggest players set to gain include AMP, Perpetual, Challenger Financial Services and AXA Asia Pacific, plus major banks running large fund businesses such as the Commonwealth Bank of Australia.

What can Hong Kong learn?

High fees and fragmented providers — the same disease. Hong Kong’s MPF suffers the same ailments: steep fees and a crowded trustee field. Australia’s playbook — a low-fee default product plus back-office upgrades to force economies of scale — is worth the MPFA’s attention — Australia’s reform is itself an MPF fund fees comparison case study in how low fees can go.

To compare Hong Kong MPF fee levels, visit MPF fund comparison.