Nobody likes paying fees, particularly when you can’t see what you’re paying for. So when it comes to your super fund, it’s worth learning a bit more about the fees you’re paying and why.
Like most things in the super industry, the fees you pay depend on the type of super fund you are a member of, and how you decide to invest your super account within that fund.
Fees are an area where super funds compete against each other, so it’s worth regularly checking what you’re paying to ensure you’re not paying too much. For more information on the fees your super fund charges, check your fund’s website or product disclosure statement (PDS).
Need to know
Some super fund fees and charges are individually listed on your member account statement (such as the administration fee and any insurance premiums).
Other fees (such as the various fees charged by the fund’s investment managers) may be bundled together and deducted from your investment return or crediting rate before it’s added to your super account.
10 super fund fees and charges you need to understand
1. Administration fee
This account management fee represents the cost to your super fund of looking after the various administrative tasks relating to your super account, such as sending out account statements, providing online services and recording your account transactions and contributions.
Under 2017 rules from ASIC, super funds must report their administration fees under the headings:
- administration fees – account keeping fee
- administration fee – trustee operating cost
Super tip
Check out the SuperGuide Super Fees and Return Calculator to see the real impact of fees and returns on your future super balance.
For more about some of the cheaper super funds in the market, see SuperGuide article Super and pension funds with the lowest fees.
2. Investment fee and indirect cost ratio (IDR)
These fees represent the costs involved in professionally managing the investments your super fund makes on your behalf. The investment fee is usually a percentage, while the indirect cost ratio (IDR) varies depending on the particular investment option.
The IDR includes costs paid by the super fund to external investment managers. Each investment option within a super fund has a different IDR, as the costs involved in investing in different asset classes vary. For example, the charges for an international share option will be higher than a cash investment option, as the international share option involves paying fees to professional share managers, together with transaction costs such as brokerage and tax.
Some funds also include the following costs in their investment-based fees:
- Performance fee: This fee may be paid to an investment manager used by the super fund to manage the fund’s investments. It’s payable if the investment manager exceeds the performance target or benchmark set for it by the super fund.
- Buy/sell spread: This covers the transaction costs the super fund pays when it buys and sells investment assets. For more information about buy/sell spread fees, see SuperGuide article Super fees: What are buy/sell spread costs?.
- Brokerage: These fees relate to the cost of buying and selling shares.
- Settlement costs: This includes fees charged by the custodians that hold the super fund’s assets.
3. Withdrawal or exit fee
Most super funds will charge a withdrawal fee if you take money out of your super account, such as when you shift your money to another super fund, or when you withdraw your full account balance at retirement.
These exit/withdrawal fees are deducted directly from your account to recover the costs of disposing of all, or part of, the investment assets that represent your interests in the super fund.
4. Financial advice fee
If your super fund charges this fee, it’s usually deducted directly from your super account and is to pay for personal financial advice you have sought from a licensed financial adviser – either over-the-phone or in person – about your super and financial position. For more information, see SuperGuide article Retirement planning: How much does financial advice cost?.
5. Investment switching fee
If you switch between the various investment options offered by your super fund, you may be required to pay a fee. Some super funds offer free switching, while others offer one free switch each year and then charge a fee for any subsequent changes. For more information, see SuperGuide article Super investing: How to change your investment option.
6. Establishment fee
Some super funds charge this fee to cover the administrative cost of setting up your account in the super fund.
7. Expense recovery fee
If the super fund is required to pay expenses on your behalf as a member, your super account may be charged a fee to help recover the amount.
8. Contributions splitting fee
If you decide to take advantage of the potential tax advantages of splitting your annual concessional (before-tax) super contributions with your spouse, the super fund may charge you a fee to move some of your super contributions into your spouse’s account. For more information on contribution splitting, see SuperGuide Contribution splitting: How to boost your spouse’s super.
9. Family Law Act information request
This fee is charged if you request information about a super account under the Family Law Act.
Many funds also charge a family law splitting fee. This applies if, after a separation and Family Law Court order to split your super with your former spouse, your super fund is required to split your super account and move the money to your former spouse’s super account. For more information, see SuperGuide How is superannuation split in a divorce?.
10. Insurance premiums
When you join a super fund, you usually receive default insurance protection for death and Total and Permanent Disability (TPD). You are required to pay for this cover, so the premiums are charged against your super account balance on a regular basis (often monthly).
The premium cost varies depending on the type of super fund and level of insurance protection you hold (death only, death and TPD, income protection, or all three types of insurance cover).