As a super fund member, you pay fees for that super fund to look after your super savings. Do you know how much your super fund charges, and how those super fund fees will affect your final retirement balance?
One of the key points from the Productivity Commission report on super was the significant difference underperforming funds can have on superannuation balances. The Productivity Commission found:
“…being defaulted into a single top-performing MySuper product would lift the retirement balance of the median 55 year old by up to $61,000 when they retire, compared to being defaulted into two underperforming products. For a new workforce entrant today, the gain would amount to $407,000 by the time they retire in 2064.”
It is commonly known that better investment performance will mean a larger retirement balance, but it is not commonly understood how much strong investment returns compound over time. A seemingly minor percentage point difference can mean tens of thousands, or hundreds of thousands of dollars difference after decades.
The level of fees also play their part in determining how fast your super account grows. A difference of 0.2% or 0.5% may feel trivial now, but the effect on your retirement could be far more consequential.
For example, if your super account balance is $200,000 and your super fund charges you $2,000 a year, that works out to be a 1% fee on your super balance. If you super fund charges 1.5%, then the super fees work out to be $3,000 a year. The extra $1,000 a year in fees can add up. If your super account balance is $400,000, then the difference in costs between the 2 funds is $2,000 a year – nearly $40 extra a week.
Wouldn’t it be great if you could see the real impact of fees on your super account? With this in mind, we have created the SuperGuide Super Fees and Return Calculator that enables you to project a future super balance based on your current super balance, salary, age and desired retirement age.
You can then easily see the difference that fees and average rates of return can make on your projected super balance on retirement. The Fees and Average rate of return have sliders so you easily change their value in 0.1% increments.
Tip: If you have difficulty finding the fee percentage your super fund charges you, your super fund will often specify the dollar amount of fees it charges you. You can work out the fee percentage by dividing the dollar amount quoted in fees by your account balance, to obtain the fee percentage.
You can also see the difference additional super contributions could make.
Note: The SuperGuide Super Fees and Returns Calculator also allows you to compare two different fees and average rates of return at the same time.
Note: Results are adjusted for inflation (3%) and shown in today’s dollars.
Super fees and returns calculator
For more information on super fund fees, see the following SuperGuide articles:
- Super fees: Top 10 cheapest funds in Australia
- Comparing super funds: 10 fees and charges you need to know about
- SMSFs: How much does a DIY super fund cost?
For more information on the top-performing superannuation funds for the latest financial year (and previous financial years) see the following SuperGuide articles:
- Top 10 performing super funds for 2017/2018 financial year (and previous years)
- Top 10 performing super funds over 10 years (to 30 June 2018)
- Asset classes: Naming the investment winners for the 2017/2018 financial year (and previous years)
- Super funds gain 9.4% for 2017/2018 financial year
For more information on the top-performing superannuation funds for the latest calendar year (and previous calendar years) see the following SuperGuide articles: