The sting in your fund’s tail

Account-based pension managers’ practice of charging higher fees than accumulation phase superannuation funds is being questioned.

And members are being urged by research firm SuperRatings to shop around for a more cost-effective pension fund that isn’t fee gouging.

SuperRatings executive director Kirby Rappell told YourLifeChoices one reason pension funds may have higher administration fees is because they potentially spend more time answering members’ queries once they begin drawing down their savings.

“You are less likely to be ringing up your super fund if it is still entirely in the accumulation phase, because you haven’t begun to be paid an income stream.

“Also the function of organising pension payments may add to administrative costs.”

However, Mr Rappell said given account-based pensions rarely have a life insurance component, it would make more sense for their fees to be more modest than at present.

“We would like to see pension funds’ pricing come down more in line with what accumulation super funds charge,” he said.

Mr Rappell was speaking after SuperRatings released Fund of the Year winners at Tuesday’s annual awards, which recognise excellence in the super and retirement industries.

The top gong was taken by UniSuper, with MySuper of the Year finalists comprising AustralianSuper, CareSuper, First State Super, HESTA, Hostplus, Intrust Super, QSuper, Rest and Sunsuper.

The Pension of the Year winner was QSuper, followed by AustralianSuper, BUSSQ, Cbus Super, Equip, HESTA, Sunsuper, TelstraSuper, UniSuper and VicSuper.

The criteria used to judge account-based funds varies from that used for accumulation funds in three main ways, Mr Rappell explained.

“We look at the underlying tax burden of each account, the fees they charge and the level of flexibility offered to members drawing down their money,” he said.

“For instance, what is the frequency of payments? Is it monthly, fortnightly or weekly? We don’t believe that a member who was used to being paid their wages fortnightly should have to wait a month to get their income once they retire.”

Other metrics used to assess which pension funds offer a better deal include:

  • does the fund allow payments to increase in line with the consumer price index?
  • are drawdowns from certain asset classes limited or does the fund allow the member to decide if payments should come out of the cash, shares or other investments in the portfolio?
  • are beneficiary nominations flexible? Usually, a member who makes a binding nomination must refresh their choice every three years.
  • how long does it take to access a one-off, large payment for an emergency such as unexpected surgery?
  • can you apply for payments online?


Mr Rappell said one of the features that impressed him about QSuper’s account-based pension was that the fund segregates the pension in a way that lends it greater flexibility, including the ability to capture franking credits.

Earnings from funds in pension accounts are not taxed.

Switching out of one account-based pension into another is simple, he said, but cautioned that professional advice from a tax expert should be sought first.

“There are some grandfathering and tax rules that may have punitive consequences depending on what type of fund you are in and how long you have had it,” Mr Rappell said.

However, he added there may be some funds without these disadvantages and he encouraged retirees to do some research to ensure they are not paying higher fees than necessary.

A starting point could be looking up the top-10 pensions of the year, he said.

Would you consider rolling over your account-based pension into another fund if it were to your benefit?

Related articles:

Best super funds
Unpaid super income
Is your super being maximised?

YourLifeChoices Writers
YourLifeChoices Writers
YourLifeChoices' team of writers specialise in content that helps Australian over-50s make better decisions about wealth, health, travel and life. It's all in the name. For 22 years, we've been helping older Australians live their best lives.
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