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Stronger Super

Stronger Super. Introductory comments. The essential ingredients. What makes a good DC retirement plan?. Economies of scale are shared with members Strong alignment of interests Clear investment beliefs Focus on outcomes Trustee skill and knowledge Proper retirement solutions

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Stronger Super

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  1. Stronger Super Introductory comments

  2. The essential ingredients What makes a good DC retirement plan? • Economies of scale are shared with members • Strong alignment of interests • Clear investment beliefs • Focus on outcomes • Trustee skill and knowledge • Proper retirement solutions • A sustainable business model

  3. Why did we need MySuper? What did we find? • Too many sub-scale funds • Governance not up to the mark • Too much choice at too high a cost • It’s a compulsory system – must be efficient • Super is a public-private partnership • MySuper intended to set a benchmark • Not too dramatic a change

  4. OECD – impact of fees on outcomeTable 6.3 OECD Pensions Outlook 2012

  5. Estimated fees for MySuper1 From the Super System Review report 1. Source: Deloitte, report to Australian Super System Review – April 2010. Assumes a $25,000 account, based on 2010 market data. Includes cost of advice provided by the fund.

  6. Scale Why are big funds better? • Lower asset management and administrative unit costs • In-house expertise (better governance) • Governance premium of 1 - 2% good v. poor • Private placement participation, access to private markets • Enhanced services • US$35bn fund - 43-50bps better than US$1bn one • 2012 APRA study on fund size and performance

  7. Effect of fund size on performance* *APRA Working Paper March 2012

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