Product design emerges as key

Improvements to product design, better communication and greater flexibility have seen CARE Super and ING Corporate Super climb to the top of the Heron Quality Star Ratings for 2008.

CARE Super emerged as the top-rated retail product, while ING Corporate Super was the top-rated corporate product.

The managing director of the Heron Partnership, Chris Butler, said both products had made enhancements to their offerings, making them even more attractive to members.

He said ING had improved its insurance offering, included some new investment options, enhanced its communications and introduced fee flexibility.

For its part, CARE Super had introduced a range of enhancements including a new financial planning service and improvements to its education services, communications and a website.

However, if one thing emerged from the latest Heron Quality Star Ratings that should concern the superannuation industry it was the question of fees.

Butler said although the superannuation market remained very competitive and product improvements had been numerous, as a general comment fund members were paying more in fees.

To illustrate the fee movement over the past 12 months or so, Butler said: “If you take a membership period of 25 years and assume the same contribution and investment returns, there has been a decrease of about 5 per cent in the average retirement benefit produced by all retail superannuation products assessed by Heron compared with 12 months earlier.

“Interestingly, if you only include the 31 2008 five star rated retail products, the decrease in retirement benefit is about 2.3 per cent,” Butler said.

He said that, additionally, there was a considerable difference between the retirement outcomes of each of the retail products.

“For example, based on the above assumptions, First State Super and AGEST, being the two lowest cost five star rated retail products, produce a retirement benefit some 17 per cent greater than the average retirement benefit produced by the combined 31 retail products,” Butler said.

He pointed out that Heron’s analysis of administration and investment fees excluded any adviser fees an individual may have agreed to pay to their financial planner, enabling a like-with-like comparison.

The Heron analysis suggested that superannuation fund members were likely to be more focused on fees as a result of the current downturn in the market.

Discussing how Heron arrived at its conclusions, Butler said when assessing superannuation products the company considered about 150 product features grouped under five areas of importance, with investment arrangements and insurance having the highest weightings.

He said that in respect of investment arrangements, AMP’s SignatureSuper achieved the highest rating of all corporate products, the Mercer Super Trust — Personal Superannuation Division achieved the highest rating of all commercial master trusts and Sunsuper achieved the highest rating of all industry funds assessed.

In respect of insurance arrangements, he said BT’s Lifetime Super — Employer Plan achieved the highest rating of all corporate products, AXA’s Summit the highest rating of all retail products and Cbus the highest rating of the industry funds assessed.