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Super fund fees are unavoidable, but not all super accounts are created equal. Fees vary greatly by fund and investment type, but one thing they all have in common is they can be, according to the Productivity Commission (PC), “the biggest drain on net returns”.
The PC report concluded that “fees can have a substantial impact on members — for example, an increase in fees of just 0.5% can cost a typical full-time worker about 12% of their balance (or $100,000) by the time they reach retirement”.
The Productivity Commission also claimed that fees “are also a much more predictable indicator of a fund’s investment performance … than gross returns”. This is a contentious view though as we discuss in the SuperGuide article Super fund fees: Do lower fees mean better net returns?
Because of the considerable influence fees have on your final super balance, it’s useful to understand what the average super fund fees are. This way you can better understand where your fund sits within the super landscape and better evaluate its overall performance and value for money.
Comparing super fund fees is not easy
The Productivity Commission also found significant gaps and inconsistencies in how funds reported data on fees and costs. Which it believed “harms members by making fee comparability difficult at best, and thus renders cost-based competition largely elusive”.
Beyond fees many Australians also struggled to make investment comparisons due to there being too many super products to compare (around 40,000!).
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The report stated that, “close to 60% of members do not understand their fees and charges, and around 40% lack an understanding of basic investment options (such as growth, balanced and conservative)”.
Australians pay a lot in super fees, but at least it’s falling
The Productivity Commission also highlighted that Australians pay over $30 billion a year in fees on their super (excluding insurance premiums).
One piece of good news is that in general terms fees have been falling, although this is mainly because due to reductions in fees among retail funds, who on average were (and remain) significantly higher than industry (not-for-profit) funds.
Fees as percentage of assets, APRA-regulated funds, 2007–2017
Source: Productivity Commission analysis of SuperRatings data
The Productivity Commission suggests that the big driver for lower fees is due to increased competition from the SMSFs, as well as the introduction of MySuper funds in 2014.
Average super fees for various balances and investment options
The following table is based on analysis by SuperRatings (on behalf of the Australian Institute of Superannuation Trustees (AIST)) on average super fund fees as at 31 December 2018.
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The table shows the median annual fees for various super balances and investment options. Median means that half of the fees analysed were below this figure, and half were above. SuperGuide has also calculated the fees as a percentage of balance.
Median super fees for 3 balances and 12 investment options
|Investment option||% in growth assets||Super balance: $5,000||Super balance: $50,000||Super balance: $250,000|
|Fees||Fees as a percentage of balance||Fees||Fees as a percentage of balance||Fees||Fees as a percentage of balance|
|Diversified Fixed Interest||N/A||$132||2.64%||$605||1.21%||$2,475||0.99%|
Source: SuperRatings for AIST
The number one insight from the findings is there is no such thing as an average fee. Super fund fees vary not just on the balance, but also by the investment option.
For example, the median fee for a $5,000 balance invested in a Balanced option would be paying 2.81% (as a percentage of balance) compared to 1.25% for a $250,000 balance.
Similarly, the median fee for a $50,000 balance invested in a High Growth option would be paying 1.67% (as a percentage of balance) compared to 0.66% for the same balance invested in Cash.
SuperRatings’ report also shows that the fees for MySuper funds (default super funds when you don’t choose your super fund) are significantly lower than most of other investment options. For example on a $50,000 balance, MySuper funds average 1.15%, compared to 1.47% for the average Growth fund.
SuperRatings’ analysis also compared the median fees for each investment option for Not-for-profit (Industry funds) against Retail Master trusts (Retail funds). For simplicity we have only included below the results for a $50,000 balance, but the differences were very similar for $5,000 and $250,000 balances.
Median super fees for $50,000 balance and 11 investment options: Not-for-profit vs Retail Master Trusts
|Investment option||Not-for-profit||Retail Master trusts|
|Fees||Fees as a percentage of balance||Fees||Fees as a percentage of balance|
|Diversified Fixed Interest||$313||0.63%||$801||1.60%|
Source: SuperRatings for AIST
The results clearly reinforce the Productivity Commission findings that retail funds are on the whole significantly more expensive than industry funds. Based on the figures above, on average the median retail fund is 70% more expensive than the equivalent median industry fund, but for some investment options such as Secure, Australian shares, International shares, Diversified Fixed Interest and Cash the median fund is more than twice as expensive.
One thing the report did also note though was the differences between Industry funds and Retail funds were considerably smaller for MySuper products – for example just $11 per year (0.02%) on a $50,000 balance.
What impact does fund size have on fees?
One other aspect identified by the PC report was “there is an observable relationship between fund size (measured by assets) and costs, with larger funds having lower average costs”, which is worth being aware of if you are in a smaller fund.
Fees applicable for a $50,000 balance, 2016
Source: Productivity Commission analysis of SuperRatings and APRA data
Exit and switching fees are generally low
The Productivity Commission also found that exit and switching fees were generally low, and in fact 39% of fund members were in products that don’t include an exit fee.
Generally, exit fees are levied as fixed dollar amounts, ranging from small nominal amounts up to around $180. For the average MySuper member, exit fees are 0.1 per cent of assets, or $50 for a $50,000 balance. For ‘choice’ members, average exit fees are around double this, at 0.2 per cent of assets, or $100 for a representative member.
The Federal Government has now introduced a Bill to ban exit fees altogether (the Treasury Laws Amendment (Protecting Your Superannuation Package) Bill 2018).
How can I find out what fees I’m being charged?
The fees charged by your fund are either a dollar amount (fixed) or based on a percentage of your balance, earnings or both, and are deducted from your super balance.
Your super fund must report all fees and costs in the product disclosure statement (PDS) and in your annual statement. You might also find a schedule of fees on your fund’s website.
If in doubt, call your fund or financial adviser and ask them to explain how much you are being charged.