Super fees fall for first time in six years

Fee drop attributed to pressure on retail funds.

super fees

In good news for retirees, gross superannuation fees have fallen for the first time in six years, according to research company Rainmaker Information.

Super fund members in Australia are now paying 1.1 per cent in fees on average, down from the 1.2 per cent they were paying in 2018. Total fees in the $2.9 trillion sector are estimated to be $32 billion.

Rainmaker attributes the movement primarily to “retail funds lowering their fees in response to members moving across to lower priced not-for-profit (NFP) funds”.

A Productivity Commission (PC) report into the efficiency and competitiveness of the superannuation system – handed to the Government late last year – found, among other issues, that “while some funds consistently achieve high net returns, a significant number of products underperform, even after adjusting for differences in investment strategy. Underperformers span both default and choice, and most (but not all) affected members are in retail funds.”

It also stated: “Evidence abounds of excessive and unwarranted fees in the super system. Reported fees have trended down but a tail of high fee products remains entrenched, mostly in retail funds.”

The financial services royal commission led by Kenneth Hayne also investigated the superannuation sector and, in February, the Morrison Government approved all nine recommendations relating to fees, multiple accounts, advice and insurance.

The inquiries would appear to be having the desired effect.

The Rainmaker Information super fund fee study analysed fees charged by more than 500 superannuation funds and 50 self-managed super fund administrators.

It concluded that super funds were capitalising on their growth in assets and, as a result, were able to reduce costs for members.

“Super fund fees are approaching an average of one per cent. These reductions show an industry shifting towards a greater commitment to improving super for the members,” said head of superannuation at Rainmaker Information, Jason Ross.

“Australia’s 13.5 million super fund members still pay $2400 on average each year in fees, the equivalent of the average household energy bill.”

Of the 1.1 per cent members pay in fees, 0.7 per cent is paid for investment fees and 0.4 per cent for administration and product-related fees, on average, says Rainmaker.

Members pay different fees depending on their product type, Rainmaker reports:

  • Workplace funds, those used by employers, charge an average 1.24 per cent.
  • Personal funds, which members can join as individuals, charge an average 1.49 per cent.
  • Retirement funds, for members who have retired, charge an average 1.33 per cent.
  • Small self-managed super funds (SMSF) charge an average 0.80 per cent.

The fall in gross fees was primarily a result of retail funds lowering their fees in response to members moving across to lower priced not for profit (NFP) funds, the Rainmaker report says.

In 2015, the average retail MySuper product charged 0.24 per cent more than NFP MySuper products. Today the gap has narrowed to 0.04 per cent.

Mr Ross said: “After 10 years of the regulators failing to make considerable impacts on the super landscape, last year’s Productivity Commission and [financial services] royal commission have already started to prove their effectiveness.”

Rainmaker Information is a privately held Australian company and provides marketing intelligence and research on the wealth management industry.

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    COMMENTS

    To make a comment, please register or login
    floss
    17th Oct 2019
    10:32am
    26 TIMES our leader told us there is no need for a inquire you work it out, can we trust this man.
    80 plus
    17th Oct 2019
    10:42am
    many did at the last election and the fools will continue to vote LNP.
    Anonymous
    17th Oct 2019
    4:10pm
    80 plus - you write like someone with no dosh in his/her pocket. At 80 you must be considered a dill.
    Anonymous
    17th Oct 2019
    9:29pm
    Easy, Jim - we don't use those kind of terms here...
    thommo
    17th Oct 2019
    11:33am
    32 billion in fees?,where's it all going?
    Anonymous
    17th Oct 2019
    11:35am
    Back pockets of the honchoes who run the show...

    17th Oct 2019
    11:42am
    Me? I'm waiting for the apologist lobby to start in on Shorten etc.... rather than discuss the issue...

    Sounds to me like a one-stop shop would cost a lot less than $32billion... though, of course, there are establishment costs and such to be covered before any cash is handed to the overfed honchoes I mentioned ...

    This is, it needs to be tightened and fair costs accepted - just not the routine gouging that seems the norm with (mostly) retail funds, the operators of which see this money as their own plaything... and certainly the contributors find it hard to get it out...

    This is intersting....

    "Paying superannuation death benefits

    A superannuation death benefit is a payment you make to a dependent beneficiary or to the trustee of a deceased estate after the member has died. You should make this payment as soon as possible after the member's death.

    The form of the benefit payment, and who it is paid to, will depend on the governing rules of your fund and the relevant requirements of the Superannuation Industry (Supervision) Regulations 1994 (SISR).

    You can pay the deceased's dependants as either or both:

    a super income stream
    a lump sum.

    You can pay the deceased's non-dependants:

    a lump sum."

    https://www.ato.gov.au/Super/APRA-regulated-funds/Paying-benefits/Paying-superannuation-death-benefits/

    This part is highly interesting:-

    "The form of the benefit payment, and who it is paid to, will depend on the governing rules of your fund " ...

    Sounds like everyone needs to read the fine print and ensure they have this all tied up...
    Horace Cope
    17th Oct 2019
    12:09pm
    I don't understand your "one-stop shop" comment, TREBOR. Are you suggesting that all super funds be held by one incredibly large super fund? When we read of returns generated by different super funds, the highest performer one year doesn't appear the next year as the highest performer. Each fund has its own group of people who choose the investment strategy for the next period. Some funds do well and some have difficulties but my point is that if there is only one fund, there will only be one group choosing the investment strategy. I think that the current system creates competition which has to be beneficial for super fund members.
    Anonymous
    17th Oct 2019
    12:23pm
    For a long time now, Horace, I've been advocating a one-stop shop super fund run by a fully independent body, and out of the hands of politicians and their retail vulture mates, and that includes unions whose funds are run on the same basic 'business model'.

    The idea is actually more of a 'retirement packaging scheme - and on in which all the disparate and often disruptive threads of super - some amazingly privileged, then scum for the peasants etc - would be drawn together and all treated the same in the opportunity to provide a basic amount to cover retirement pay, then an opportunity over and above that to make a savings account (duly taxable on profit), so that those who can, may put away more, but not without it paying its way...

    No more nonsenses such as 'politician super' where the sky's the limit and it is pure self-interest at work and totally out of synch with modern expectations in the West, and the ability of some to hide income... not only that, but no more grand theft Canberra - with the likes of St Bob of the Hawke etc 'resuming' the pension fund into consolidated revenue - nationalising savings so to speak - for the 'benefit' of the nation (BS, BS).... and thus planting the idea that pensions are somehow not a bought and paid for Right under our Social Security system.

    FDR said that nothing in politics happens by chance - it was planned that way - so St Bob etc have nowhere to hide on this one... they KNEW what they were doing... planting the seeds for a future crackdown on pension rights so as to suit some mythical pie-in-the-sky budget desperately seeking an equally mythical surplus.

    Anyway - we do not want a repeat of that Grand Theft Canberra - and the return of the stolen Future Fund to Australian waters to help form the base of this new scheme is mandatory...

    I've loosely labeled this idea The Trebor Scheme.... and politicians and the like will never come at it for one reason - they currently have an astoundingly beneficial and quite unwarranted scheme that they will never let go of - same as they will never truly attack trusts and company structures that are 'tax effective' - sine they and their families use them as well.... to not pay full tax.

    Keep a close eye on the difference between window dressing and realities.
    Anonymous
    17th Oct 2019
    12:24pm
    Competition, thus far in every area of social endeavour, whether it be power, gas, roads or super, has singularly failed to produce the goods... only the costs.

    Put simply - too many duplicated mouths to feed.... and too many willing to dive into the till to suit their own ends...
    Horace Cope
    17th Oct 2019
    12:31pm
    Cuppla fings - your idea seems to be what we have now. Those who are the grasshoppers of the world, living from payday to payday get a pittance thrown their way, it's called the age pension. Those who can afford it can put more aside from their bloated salary and it's called salary sacrifice.

    You mentioned Hawke and one thing still rankles. The woman who stood by his side all through his years of climbing the greasy pole was cast aside when his hormones kicked in. Legislation had to be quickly introduced so that the wife of a former PM could get a politician's pension which she was denied because of the divorce.
    Anonymous
    17th Oct 2019
    9:32pm
    Yeee-usssh - agree over Hazel... just be wary of looking at the black and white of grasshoppers and ants etc... it's not always beer and skittles out there... and many have been caught out by the collapse of a company and thrown on the scrapheap at the time when they should have been consolidating for retirement.

    It might seem easy to say there are either wastrels or savers - but that is not really the case.

    Many struggled and saved and went without to have a little - only to see it ripped away ... and many simply, especially nowadays with the costs of living, never had the real chance to be ants and save for the winter.

    Mind you - this is the winter of our discontent..... watch this space...
    john
    2nd Nov 2019
    1:47pm
    Well point one of 1% wow. Massive saving!
    john
    2nd Nov 2019
    2:01pm
    I'd add to Trebor's comments I think a one only super pension scheme strictly controlled( if that's possible) to help make everyone happy and satisfied and with comfortable retirements for everyone.
    I realize it can be called the pension, but it needs something else to work. That is honesty and assurance that it will be kept and never be "ripped away", as said before!

    I thought that is what the pension savings scheme was meant to be, as a guarantee that the governments of all colors had put aside, but it appears its been overspent ?

    Not sure how this works, but the TAB hah or, What people call the stock market , seems to be a gamble on a racehorse type of super /pension retirement plan and makes the future look quite dangerous.
    We actually should have total packaged safety, for all retirees, and the T.A.B. types can still take their chances if they want.
    But how the hell can you do that?
    Well you set up fair and equal rules and make sure the lowest income folk, when they retire are safe , SAFE!

    Can we do that ....?????????????????????????????????????????????????????????????????????????????


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