Reduced returns for twice the cost – the problem with bank-owned super products.
Some bank and insurance company-owned super funds are charging almost twice as much in fees compared to profit-to-member funds, according to new research commissioned by the Australian Institute of Superannuation Trustees (AIST).
The Fee and Performance Analysis 2019 by leading superannuation research house SuperRatings investigates the differences between fees and returns across the many super products on offer and finds significant disparities between the fees charged by for-profit retail funds and profit-to-member funds.
The typical annual fee paid by someone with a $50,000 super balance in a high growth investment option offered by a retail fund is $942. This compares to an average $591 in fees charged by a profit-to-member fund for the same product.
The difference is even more stark for those wanting to put their superannuation into more defensive investment products, such as people approaching retirement.
The SuperRatings research found that a person with a balance of $250,000 in a mostly cash invested ‘secure’ option in a retail fund would be paying on average $3255 per annum, or 274 per cent more for the same product in a profit-to-member fund.
The research notes that as account balances increase, the fees for the profit-to-member sector become even more competitive, given the lower overall asset-based fees charged.
AIST chief executive Eva Scheerlinck said the report highlighted the need for regulators to provide tools that made it easy for members to compare fees and charges and make informed decisions about which super products were best for them.
“Currently, it is almost impossible for members of Choice funds to compare the fees and charges of their super fund. In the 21st century, this shouldn’t be that hard,” she said.
“Many members are paying almost double the fees for less returns on their retirement savings. It’s hard to see how the trustees of these funds can justify this in the post-royal commission environment.
“People in low-performing funds will be losing out on their superannuation and they won’t even know it. This is unacceptable.”
In terms of returns, SuperRatings data shows that median profit-to-member MySuper funds delivered 6.47 per cent over the three years to 31 December 2018, well above the 4.94 per cent achieved by the for-profit retail super funds.
The research notes that historical comparisons between fees are harder now, given that the introduction of new fee and cost disclosure laws have changed the way funds disclose their fees.
Are superannuation fees a concern for your retirement? Have you ever switched funds because of exorbitant fees?