MLC is switching its default superannuation product from single strategy to lifestage. It's also increasing its allocation to growth assets.
MLC MySuper currently has a 70% allocation to growth assets like stocks, property and infrastructure and a 30% allocation to defensive investments like cash and fixed interest.
Starting March 23, the single strategy will be replaced by a combination of three portfolios:
How will asset allocations change with age?
- MySuper growth portfolio: 85% growth assets and 15% defensive. Its objective is to beat the Consumer Price Inflation by 3.5% per annum over any 10 year period. This is higher than the old MySuper option's target outperformance of 3%
- MySuper conservative growth portfolio: 50% growth and 50% defensive. Its objective is to beat CPI by 2.5% pa over any five-year period
- MySuper cash plus portfolio: 100% cash. Its objective is to outperform the Bloomberg AusBond Bill Index over any one year period.
Members under 55-years-old will be invested in the MySuper growth portfolio. When the member turns 55 and gets closer to retirement, MLC will adjust allocations every three months measured according to the member's birthday. It means the member's MySuper will become invested in the three portfolios described above.
For over 65s, the MySuper balance will continue to be invested in 70% growth investments and 30% defensive (like the old MySuper single strategy allocations) until the member decides what they want to do.
The investment fee has remained steady at 0.46% of the balance per annum.
MLC has removed the exit/entry fees of 0.05% of the amount moved in or out, following the end to exit fees legislation for which was passed by the Senate on February 14.
Rainmaker Information executive director of research and compliance Alex Dunnin said the changes appear to be a fundamental design shift for MLC.
"It shows MLC is serious about differentiating itself among retail funds. Its new lifestage option design seems to be modelled on highly successful lifestage products offered by award winning not-for-profit funds like First State Super and Sunsuper which don't switch asset allocations until the members are five to 10 years from retirement," Dunnin said.
"Most life stage products offered by retail funds have a high number of lifestages with many changing members' asset allocation every five or 10 years, often starting these switches when members are very young."
Rainmaker Information senior research analyst Pooja Antil said fees under the new MLC MySuper "could go up marginally according to the indirect cost ratio figures published in the PDS."
Why the changes?
MLC MasterKey Business Super (MLC MySuper) currently ranks 48 out of 54 workplace super default single strategy investment options (on a three-year basis to 31 December 2018), according to SelectingSuper tables. Returns were 4.4% pa.
An MLC spokesperson was unable to comment further on why MLC decided to increase growth allocations; where it has found opportunities to buy growth assets and sell down defensive ones; and how it will manage the transition.
"As part of the Wrap platform pricing changes announced last month, MLC Wealth chief executive Geoff Lloyd said [sic] he was continuing to modernise and improve the business for the benefit of our clients," an MLC statement said.
"Over the next 12 months, we will be implementing a number of initiatives across the business to ensure our clients have access to competitive fees, and our products and services are meeting their changing needs. As soon as we are ready to make any further announcement, we will advise our clients, advisers and the market."