- Mercer SmartPath™ is designed to operate through not simply to retirement
- Available from 1 December 2013. Default members to transfer from 1 January 2014
- Investment Management Fees reduce as members get older
Mercer has received authorisation from the Australian Prudential Regulatory Authority (APRA) to offer its MySuper product including the Mercer SmartPath™ investment portfolio. Mercer’s MySuper product features a whole-of-life investment strategy believed to be one of the most innovative and flexible lifecycle funds available to Australians, it will be available from 1 December 2013.
Ben Walsh, Leader of Mercer’s Financial Services Business, Pacific, explained a lifecycle investment option automatically changes the mix of assets your super is invested in to match your life stage and ability to take on risk. However, Mercer SmartPath™ is different from many other lifecycle products on the market because it is designed to go throughout retirement, not simply up to retirement as required by MySuper legislation.
“Lifecycle doesn’t mean working life. Going ‘throughout’ retirement and not just ‘to’ retirement means Mercer SmartPath™ supports you while you are working as well as during your retirement years. It sounds simple, but it’s surprising how many lifecycle options really only work for you until the day you retire and not during your retirement,” he said.
“The strategic asset allocation that drives Mercer SmartPath™ is the ultimate ‘smarts’ behind our lifecycle product and is critical to our ability to deliver an adequate and sustainable income for people throughout their retirement.
“For example, we increase diversification and invest in lower volatility shares leading up to retirement to better manage risk. We also allocate a higher proportion to tax-aware Australian share strategies in retirement to improve returns and take advantage of the tax exempt status of retirees.
“We know around two thirds of individuals’ retirement income will come from returns earned during the post-retirement phase. We therefore believe it is important for retirees to maintain some exposure to growth assets.
“Mercer SmartPathTM has a higher allocation to growth assets after retirement compared with other lifecycle options in the market. This is because we factor in the age pension, which acts as an annuity and means people can generally afford to have a higher allocation to growth assets, which improves the potential of their money lasting longer to fund their whole life,” said Mr Walsh.
Mercer SmartPath™ groups members in five year age bands to better adapt to members’ circumstances. Most other funds use blunter 10 year age bands.
Mercer SmartPath™ has multiple price points which means lower fees for older members to ensure that they do not subsidise younger members given riskier assets attract higher investment costs. It also means members pay lower fees when their asset balances are highest.
Mr Walsh said, “Mercer SmartPathTM is designed to generate wealth, protect you from risk, and create a sustainable income, all without you having to think about it. We all have good intentions about improving our retirement savings but more immediate priorities will often supersede our intentions.
“Life happens - while you get on with living Mercer SmartPath™ will look after your super.”
Members of the Mercer Super Trust whose superannuation contributions are currently invested in the default investment option will have future contributions directed into Mercer SmartPath™ from 1 January 2014 unless they opt out of this change. Other members will be able to choose Mercer SmartPath™ from 1 December 2013.
Mercer is a global leader in talent, health, retirement and investments. Mercer helps clients around the world advance the health, wealth and performance of their most vital asset – their people. Mercer’s 20,000 employees are based in 43 countries and the firm operates in over 140 countries. Mercer is a wholly owned subsidiary of Marsh & McLennan Companies (NYSE: MMC), a global team of professional services companies offering clients advice and solutions in the areas of risk, strategy and human capital. With 55,000 employees worldwide and annual revenue exceeding $12 billion, Marsh & McLennan Companies is also the parent company of Marsh, a global leader in insurance broking and risk management; Guy Carpenter, a global leader in providing risk and reinsurance intermediary services; and Oliver Wyman, a global leader in management consulting. Follow Mercer on Twitter @MercerAU @MercerInsights