If you take a look at the annual statement you receive from your super fund, you’ll notice that there are several different fees taken from your balance. But what exactly are these superannuation fees and charges paying for, and how can you make sure you’re not paying too much?
What fees do super funds charge?
Superannuation fees come in different forms, which are deducted directly from your account. Previously, some funds charged members an exit fee when rolling their super over to another provider, but these were banned by the Australian government in 2019.
Administration fees are essentially the fees that funds charge for managing your superannuation account. These costs usually cover the staff who administer the accounts, call centre staff, issuing statements, marketing, and other associated costs. They’re either charged as a flat annual rate or as a percentage of your balance.
Administration superannuation fees are usually capped by funds at a certain amount per year. Additionally, if your balance is under $6000, the most you will pay in admin fees annually is 3% of your total balance. Different funds will charge different admin fees, so it’s important to do your research before committing to a new fund or rolling over your balance.
Investment management fees
These superannuation fees are taken directly from your balance to pay your fund’s investment managers and external parties, like asset managers and brokers. The investment fee is usually taken as a percentage of your balance.
Sometimes a fund will charge a performance superannuation fee on top of the investment fee. This amount is taken from your account balance when the investment performance exceeds a set target, though it can work differently from fund to fund. The amount is generally a percentage of your investment returns.
What are the average super fees?
It can be tough comparing superannuation fees and charges across many different funds, particularly when there are so many products on offer. MySuper funds, which are simple default options for those who don’t select their own fund have lower fees, while Choice funds, which are those where the member has more control over investments, charge more.
According to APRA, for a balance of $50,000.00, Choice products charge $218 in administration superannuation fees each year, on average. On the other hand, MySuper funds charge an average of $168 annually. That’s a 30% difference.
This table provides some insight into the minimum, median and maximum fees that are paid by someone with a balance of $50,000, with figures taken from APRA:
Average super fund fees for a $50,000 balance
|Minimum ($)||Median ($)||Maximum ($)||Minimum (%)||Median (%)||Maximum (%)|
|Conservative funds (21-40% growth)||$200||$505||$925||0.40%||1.01%||1.85%|
|Balanced funds (41-60% growth)||$155||$515||$1,320||0.31%||1.03%||2.64%|
|Growth funds (61-80% growth)||$110||$545||$1,160||0.22%||1.09%||2.32%|
|High growth funds (81-95% growth)||$275||$560||$1,240||0.55%||1.12%||2.48%|
|All growth funds (96-100% growth)||$155||$575||$1,490||0.31%||1.15%||2.98%|
Why should you care about your superannuation fees?
Superannuation fees may seem to be a fairly minimal amount of money. However, because administration fees and investment fees are often calculated on a percentage basis, they can add up, particularly if you have a large account balance. What’s more, superannuation is a long-term investment, so over a period of say fifty years, fees will add up!
The Australian Government Productivity Commission reported that superannuation fees can be the biggest drain on returns throughout the life of your account. Furthermore, their report also 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”.
There also seems to be a misconception that the higher the fees, the better the investment returns on your super balance. This is simply not true. In fact, some of the best returns come from funds with the lowest superannuation fees. We have a range of superannuation fees comparison information relating to fund profiles, so you can ensure you’re getting the best bang for your buck.
Choosing the best super fund for you
Low superannuation fees and charges should be one of the prime considerations when selecting a superfund. However, investment returns, insurance, and customer service performance are other aspects that should be taken into account.
It’s important that you judge each fund’s fee structure on total cost per year, rather than the different set amounts and percentages. This is the best way to clearly pitch each fund against the other, and you can do this on reviewmysuper.com.au. Alternatively, you can speak to one of our experts by giving us a call.
The bottom line is that you should always be aware of the superannuation fees you’re paying on your superannuation balance. It’s likely that you can do better and in turn, have more money in your pocket when you do reach retirement age.