The fees charged by your superannuation fund play an oversized – but often overlooked – role in determining your final balance at retirement. Thankfully, super fees are at an all-time low, according to the latest research.
Financial research group Rainmaker Information has analysed the fees of more than 1500 superannuation fund options, across a range of fund types, and found the fees being charged are at historically low levels.
Averaged across all super types, the data shows you’re being charged just 0.93 per cent per annum, which is a reduction of two full percentage points in the last 12 months.
What has caused fees to fall so sharply?
Pooja Antil, research manager at Rainmaker Information, says fees for default MySuper products fell dramatically during the year.
MySuper funds act as a default account for people who don’t choose their own super fund when they start a new job.
Because of this, they make up a big percentage of the superannuation market and any changes to their fees will have a big impact on industry averages.
Ms Antil says average fees charged across MySuper products wer 1.0 per cent for the 12 months to June 2023, down from 1.05 per cent a year earlier.
That may not seem like a big drop, but compounded over many years it will mean a big difference in your final amount at retirement.
“This is the biggest fall in the MySuper benchmark fee since 2014,” Ms Antil says.
“Of the MySuper products, fees are now level for retail and not for profit funds.”
Diving deeper, not for profit MySuper funds offer lower administration fees, while retail products have lower investment fees.
Funds still raking it in
Aussies may be paying less in fees as a percentage of their super balance, but the total amount collected in fees by super funds has risen by three per cent to reach $32 billion per year.
This is largely due to the overall superannuation pot growing by $2 billion in the last year from $3.3 trillion to $3.5 trillion. But in an interesting twist, total revenue from fees is growing at twice the rate of the total ‘funds under management’ (FUM).
Ms Antil says this is ultimately a win-win for both parties. Super funds are able to reduce fees for members while simultaneously making bigger profits.
“While fee revenue increased three per cent over the past year, this is lower than inflation and the overall pool of funds under management in superannuation has also increased in that time,” Ms Antil says.
“Any reduction to the average fees is a good result for consumers, and we should encourage a healthy and competitive superannuation market that continues to put downward pressure on fees.”
Pressure to lift customer service
While lower fees will be welcomed by all members, some of the largest funds are making big investments in improving customer service standards.
The AFR reports that AustralianSuper has hired 45 new complaints-handling officers, and many other major funds are advertising similar roles.
The improvements come after an Australian Securities and Investments Commission (ASIC) crackdown earlier in the year on funds ignoring consumer complaints.
ASIC found that 20 per cent of funds failed to comply with their complaint-handling guidelines, which state that customer complaints must be handled within 45 days.
What fees are you being charged by your super fund? Do you regularly check? Let us know in the comments section below.