In this blog, I typically focus on providing advice (strategies and tactics) rather than discussing specific products or businesses. This approach ensures that I avoid any appearance of promoting particular products. My goal is to maintain the independence and trustworthiness of this blog as a reliable source of information.
It’s important to clarify that my firm has no commercial interest in how our clients manage their finances. This independence ensures that our advice is always objective, just like in this blog.
However, today I will make an exception and provide an exclusive review of Vanguard Super.
A bit of background on Vanguard
Vanguard was founded by the late Jack Bogle, who launched the first index fund for individual US investors in late 1975. His vision was to create an investment company that prioritised the interests of investors, rather than those of outside shareholders or management. Vanguard operates under a unique structure: it is owned by its funds, and the funds are owned by its investors. This means that the investors are the ultimate owners of Vanguard. This structure was designed to eliminate conflicts of interest, reduce costs, and ensure that profits are returned to investors in the form of lower fees, rather than being distributed to external shareholders.
Vanguard’s investment philosophy is founded on a rules-based, evidence-based approach, primarily focused on market cap indexing. Through decades of experience, Vanguard has been able to reduce trading costs and indexing drags. For instance, the firm operates trading desks around the world, providing local expertise which translates into more cost-efficient trading that virtually no other index fund provider can match. This global reach and execution capability set Vanguard apart in the index fund space.
Vanguard launched its first index fund in Australia in 1998.
Why am I reviewing Vanguard Super?
Until 2022, Vanguard managed index portfolios for many industry super funds, overseeing more than $20 billion in funds. However, it decided to exit this business to focus on launching its own super fund.
For the past five years, I have written an end-of-financial-year blog reviewing the super returns of the top 8 industry super funds. I have only included industry funds because they have generally been the best option for Australians. However, over the years, I have been critical of their lack of cost control (i.e., failure to deliver scale), opaque investment reporting and management, and unnecessary influence of political parties and unions.
As such, Vanguard’s entry into the superannuation market was a welcome change. Like industry super funds, Vanguard operates as a not-for-profit entity. But unlike industry funds, Vanguard is free from conflicts of interest, its investment products are highly transparent, and it has a proven track record of lowering fees over time.
I’m publishing this review for two reasons: First, Vanguard’s entry into the Australian super industry could be a great opportunity for Australians who share my concerns with industry super funds. Secondly, I will be including Vanguard in my comparison for the 2025 financial year, which I’ll publish around late July, so this blog serves as a precursor to that comparison.
It’s small and new
As of April 2025, Vanguard Super had $2.8 billion in funds under management, a significant jump from $1.4 billion in June 2024. While it’s growing five times faster than the rest of the superannuation industry, Vanguard is still a very small player. For context, UniSuper manages $150 billion, and the behemoth AustralianSuper oversees over $360 billion.
Superannuation is a scale-driven business, and this is something investors need to consider. If a super provider does not reach sufficient scale, it may need to raise fees or wind up the fund.
As noted above, Vanguard is a mutual business (not-for-profit), so it does not need to generate a profit to remain sustainable. However, each investment must cover its own costs to avoid cross-subsidisation from other products. Financial statements lodged with ASIC confirm that Vanguard Super is successfully covering its expenses, despite its small size. This is great news as it suggests Vanguard will likely reduce fees even further as it continues to grow.
Recently, industry super funds have been in the news for poor administration, such as taking far too long to pay out death benefits. We have experienced similar issues within our own firm too. Not long ago, an industry fund decided not to answer any calls from financial advisors because they were “too busy”!
Most super funds outsource administration, and Vanguard Super is no exception. It has partnered with Grow Inc., a technology-focused Australian business founded in 2017, which uses blockchain to enhance security. Importantly, Grow Inc. has not been linked to any of the industry funds criticised by APRA or the media.
Management is skilled and reputable
A common criticism of industry super fund boards is that many directors lack experience in superannuation and investment management. These boards typically include a mix of employer representatives, member representatives, and sometimes independent directors. There is a legal requirement for industry funds to have an equal number of employer and member representatives. It has been suggested that unions exert significant influence over both employer and member representatives, leading to a situation where the unions’ interests could end up being the priority. Many of these directors have no financial services experience. Concerningly, there is no legal requirement for funds to appoint independent directors.
In contrast, Vanguard Super is managed by professionals with significant investment experience. The board consists of six directors: Chair Peggy O’Neal, three non-executive directors including two ex-Vanguard employees, and two independent non-executive directors. All directors have significant financial services experience. From an investment management perspective, the super fund also benefits from the expertise of over 670 staff at Vanguard Australia, along with more than 20,000 global staff. This collective investment experience far exceeds that of any Australian industry super fund.
Which investment option is best?
Vanguard Super offers three main investment options:
- Lifecycle: This option adjusts the asset allocation as you get older. If you are 47 or younger, your super will be invested in a high-growth strategy (90% growth and 10% defensive). Once you are 48 or older, the defensive allocation increases. For example, by age 60, the allocation becomes 60% growth and 40% defensive, which is quite conservative, perhaps even too conservative.
- Single sector: This allows you to invest in specific sub-asset classes, such as Australian shares, international shares, fixed interest, and cash. As I have mentioned before, I don’t recommend this option.
- Diversified: This is the typical pre-mixed option, with options like growth, balanced, and others.
In my opinion, the Diversified option is the best because it lets you select an asset allocation that aligns with your preferences and provides exposure to emerging markets and small companies, which are not available in the single-sector option. However, be aware that Vanguard’s asset allocation is more conservative than most industry super funds. For example, its Growth option has 30% allocated to defensive assets, and its Balanced option has 50%, which is a lot.
I have previously argued that superannuation investors should focus on maximising long-term returns, even if it means higher volatility. To achieve this, you must invest most or all of your balance in growth assets. If you agree with this approach, then the High Growth option is my recommendation.
Since Vanguard Super is relatively new, it does not yet have a long history of investment returns. However, you can look at the performance of its High Growth Index Fund as a benchmark. This fund was established in November 2002, so it has an extensive track record. You can see the details here.
How does its fees compare?
Vanguard charges two fees for its High Growth option:
- Two administration fees:
- A general admin fee of 0.28% of your balance, capped at $300,000 (or $840 p.a.), charges monthly.
- An Operational Risk Financial Requirement (ORFR) fee of 0.05% of your balance, charged monthly.
- One investment fee:
- A fee of 0.21% of your balance, charged monthly.
The table below compares Vanguard Super’s fees to those of AustralianSuper’s High Growth option, which invests almost 89% in growth assets, UniSuper’s High Growth option, which invests 100% in growth assets, and Vanguard’s High Growth option.
This table shows why minimising percentage-based fees is crucial, especially as super balances grow. Fixed or capped fees are more economical than percentage-based fees. For comparison of percentage-based fees only, AustralianSuper charges 0.55% p.a., UniSuper charges 0.71% p.a., while Vanguard’s percentage-based fees are significantly lower at just 0.26% p.a.
Insurance is often an important consideration too
Vanguard Super offers Life, TPD and Income protection insurance through AIA. Maximum cover is unlimited for Life cover, up to $3 million of TPD (but TPD sum insured cannot excess Life sum insured) and the lower of $25,000 per month or 75% of pre-disability income for income protection, which is likely to be more than enough for most people.
Regarding the quality of this cover for Life & TPD insurance, our independent insurance research rating provider rates Vanguard’s products with a higher quality rating than AustralianSuper and UniSuper. We also ran some comparative quotes and based on this limited analysis, the cost of insurance via Vanguard Super was very comparative – equal to the lowest costs. However, quotes can vary significantly, so it is important to conduct your own research.
Pooled super products are less tax-effective
Vanguard Super is a pooled super product, meaning its daily unit price includes an allowance for tax on unrealised capital gains, as I have previously discussed here. The advantage of non-pooled products, like wrap products and SMSFs, is that when you switch to pension mode, any unrealised gains are effectively wiped out (tax-free) if your balance is under the soon-to-be $2 million Transfer Balance Cap. So, if you use a non-pooled product for your entire life, you may avoid paying any capital gains tax.
How much tax could you save? It’s difficult to estimate as it depends on factors like your balance, investment mix, portfolio turnover, and age. I plan to review a selection of client accounts to estimate potential savings and share this information in this blog in the future. However, for example, about one-third of the share portfolio in my SMSF consists of unrealised gains. My wife and I have made significant contributions over the past five years, so I expect this proportion to grow substantially in the next decade. Suffice to say, the tax savings will be considerable in our situation.
User experience
Members can manage their super online using Vanguard Online or iOS/Android apps to:
- Check your account transaction details and balance
- Change investment options
- Upload documents such as Notice of Intent to Claim forms
- View and download statements
- Manage insurance and beneficiaries.
The final piece of the puzzle
As mentioned earlier, in a few weeks, I will be comparing investment performance for the 2024/25 financial year, as well as looking at longer-term performance. This analysis will include the top 8 industry super funds along with Vanguard Super. Based on the findings, I will conclude which fund I believe is the best.
But from what I have seen so far, I think Vanguard Super could very well be a superior option compared to industry super funds.
If I understand correctly another differentiator of Vanguard from other supers that I’ve looked at is there is no flat fee – only percentage-based fees. This can be good for lower balances or if you are running two supers. Looking forward to your performance analysis…
Yes, that is correct, Dano. “If your account balance is less than $6,000 at the end of the financial year, your administration and investment fees are capped at 3% of your account balance, with any excess refunded.”
Both my wife and I have Unisuper funds. I was looking at splitting our super 50/50 between Unisuper and Vanguard. With technical issues and cyber attacks, it doesn’t seem wise to have so much money with one super provider. Anyway, your article prompted me to compare the fees and vanguard is indeed half the price of UniSuper (for me) but you might want to adjust your wording regarding the Vanguard administration fee. I believe the fee is 0.33% up to $300k, and 0.05% pa on the remainder. For a fund of $1.5 Million that fee is actually $1,590, not $840.
Keep up the good work, you do a great job. I look forward to the next article on the subject of UniSuper and Vanguard
Hi Peter, thanks for your comments. Sorry for the misunderstanding. In the blog I state that the $840 cap only relates to the general admin fee. It does not relate to the ORFR fee which is uncapped (as you said) – see seperate dot point. So, for a $1.5m balance, you’d pay $840 p.a. general admin + 0.05% of your balance for the ORFR fee ($750). Sorry it wasn’t clear.
Regarding splitting your super, I’ll make sure I make a comment about that in my super blog in a few weeks’ time.
Hi Stuart, thanks for clarifying. If others are interested Page 9 of https://fund-docs.vanguard.com/Vanguard_Super-SaveSmart_PDS.pdf provides a detailed breakdown of each fee. Cheers Peter
My calculator says 0.32% of $300,000 is $960, or have I misunderstood something?
Oops, that is a typo. The general admin fee is 0.28% of the balance, up to $300k – max fee is $840 p.a. I have fixed it. Thanks for letting me know.
https://www.vanguard.com.au/super/performance-and-fees/fees/superannuation
Hi Stuart. I’m a long time listener, since reading your book Investopoly several years ago. Is there any way of comparing super funds in terms of customer service and accessibility to funds? Are there KPIs that funds need to meet in terms of responding to members? I’m an industry fund member, and although this often rates well in terms of fees and performance, their customer service is woeful, with long wait times (several hours) on hold and poor knowledge of “customer care” staff. Frankly I’d rather pay a higher fee and be treated like a human being.
Hi Ann, I hear you loud and clear. My team spend/waste a lot of time on the phone with them. I’ll address this in my blog in a few weeks’ time (when I compare super funds). I’ll do some digging. Thanks, Stuart
Hi Stuart, great article and thank you.
I was wondering if you have any views on a fairly new product – Stockspot super?
It seems to have all the right characteristics (index funds based – acknowledging the provider takes a cut on top, non pooled funds), although I have not compared other aspects e.g. insurance, and their fees are a little more than vanguard.
Was wondering if the benefit of unpooled funds will offset the higher fees?
Thanks!
Hi Ed, I have a blog coming up about this due to be published on 23 July – I compare pooled and un-pooled products re: tax savings. But not specifically Stockspot.