If you feel like you’re losing more and more of your super contributions to fees, you are probably right.
“The total fees in super going to product providers, fund managers and associated providers are going up,” Kirby Rappell, the general manager of research for SuperRatings’ confirmed to Money this week.
Australians have more than $2 trillion invested in superannuation, and have forked out $230 billion in fees over the past decade, according to new research from Rainmaker.
Most funds will have some sort of percentage-based fees, which means that as your account balance rises, the total amount paid in fees will go up. But the fees on a percentage of account basis should be consistent or go down as your account balance rises.
Rappell says Australians should be looking to reduce the amount they pay in fees, starting with administration costs.
“The key thing people can be doing is to make sure their administration fees, which are like your account keeping fees, are minimised as they don’t drive your return,” he says.
Investment fees, on the other hand, are more complicated.
“Assets like property, infrastructure and private equity have been strong drivers of super fund returns,” Rappell says.
While these investment strategies generally cost more, the returns could outweigh the fees.
“If you are using some higher cost investment managers who may charge 2% but they are giving you an extra 4% in return from their strategy, then you are ahead at the end of the day by some margin.
“This is the key trick from our side to recognise that funds with a good history of performance, with competitive administration fees, should help you drive your account balance.”
|Rank||Fund Investment Option||Return pa||Period|
|1||HOSTPLUS – Balanced||9.72%||3 year|
|2||MTAA Super – My AutoSuper||9.60%||3 year|
|3||Cbus – Growth (Cbus MySuper)||9.42%||3 year|
|4||AustralianSuper – Balanced||9.36%||3 year|
|5||BUSSQ Premium Choice – Balanced Growth||9.10%||3 year|
|6||CareSuper – Balanced||9.09%||3 year|
|7||UniSuper Accum (1) – Balanced||9.05%||3 year|
|8||Catholic Super – Balanced||9.04%||3 year|
|9||Intrust Core Super – MySuper||8.91%||3 year|
|10||Sunsuper for Life – Balanced||8.71%||3 year|
Returns as at 30.04.17. Rankings from 31.07.15 onwards are based on options within SuperRatings’ Indices.
Rappell says Australians need to focus on ensuring their super products are competitive.
“Then assess their net performance over the longer term, which takes the investment fee out of the equation but focuses on the outcomes your fund is giving you,” he advises.
“Advice is opt-in so you should shop around on advice to ensure the provider is well qualified but costs here vary hugely. If you are paying commissions, why? You can find providers who aren’t doing this and are passing the savings back to their members.”