Why Aussies pay higher super fees than other countries
Australians are paying more in superannuation fees than many other countries. The super industry, worth $2 trillion, is seen by many as a way for the financial services industry to make more and more money. The growth is guaranteed, as employers have to pay part of each employee’s wages into a super fund.
There are also big differences in the fees that super companies charge. The highest fees tend to be with the retail funds, such as those offered by banks.
A recent report commissioned by Industry Super Australia showed that the retail super funds (with around 30 per cent of superannuation savings), take nearly 50 per cent of superannuation fee revenue.
Not-for-profit funds, such as industry super funds, hold almost 41 per cent of super money but take only 25 per cent of fees.
The self-managed super funds, with 29 per cent of super savings, are paying almost a quarter of all super fees.
MySuper was an initiative introduced by the previous federal Labor government to protect those super members who don’t take an active interest in their super.
For most workers, their super is managed by the default fund provider as they haven’t decided to choose which company manages their super. This default fund is selected by their employer, or is outlined in their employee agreement.
Some financial planners can receive commission from a retail super fund even if they haven’t provided any advice.
This is why fees for some retail super funds are higher than industry funds, which don’t pay commissions.
Funds that comply with MySuper offer member protection such as not paying commissions to planners. At present all super payment from employers must be MySuper-compliant. But by mid-2017 all accumulated savings must be moved.
The majority of industry funds have moved their members’ accumulated savings into their MySuper-compliant funds, but retail super funds are being slower to act. For many retail funds, commissions are still being earned – some members may be receiving financial advice but some are not.
The fees for superannuation vary. When the fees are worked out as a percentage of the super account balance, a fee of less than 1.2 per cent is considered low, and anything under 1 per cent is very low.
Some funds have a set admin fee of a couple of dollars per week. There are investment management fees, determined as a percentage of the account balance. Other fees include commission for financial advice, though it is often not called a commission.
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