As the financial services sector royal commission turns its gaze to superannuation funds, revelations are emerging about the huge fees some fund managers gouge for little to no service.
Comparing super fund fees is no easy task. Some comparison sites have even taken down their data as they tighten up their own due diligence in the wake of the commission’s probe.
Ratings site Canstar lets you compare the total fees (excluding insurance premiums) for 73 funds. Spokesman Steve Mickenbecker told YourLifeChoices some funds are not included because they are too small or may have other factors that could influence their ability to comply with requirements.
“We are not associated with any of the funds, although we do provide links to some so you can click through for further information,” Mr Mickenbecker said.
The site offers star ratings based on a number of factors, such as the rate of return, and not just on the level of fees charged.
He said it was important for users to take the star ratings into consideration along with the fees charged.
“Take a balance of $180,000, for instance. The lowest fees of the funds we review are charged by Bendigo Bank on $890. The highest fees recorded, more than $4400, are charged by a Perpetual fund.
“If you look at how we rate them, based on several metrics, Bendigo gets four stars while Perpetual gets just two stars.
“Super fund members paying too much in annual costs really ought to take stock, because high fees can hurt your returns. This is a concern being bourne out by the royal commission,” Mr Mickenbecker said.
SuperRatings’ site is undergoing a rebuild in response to the royal commission findings so far. However, chief executive Kirby Rappell said generally, a fund member should not expect to pay more than $800 a year in fees.
“The MySuper average fee is $621 and the Industry average is $708,” Mr Rapell said.
“Historically, some funds charged contribution fees (fee on each amount contributed). These are no longer allowed under the Future of Financial Advice reforms; however, they have been retained on some legacy products under grandfathered provisions – keep an eye out for these.”
Ratecity.com.au rates more than 350 funds, but making comparisons on the basis of fees is not so easy on this site.
The Australian Prudential Regulation Authority (APRA) analyses all funds’ financials periodically, but a pure comparison using its spreadsheet data is still elusive.
Take, for instance, information in Table 6 of APRA’s Annual Fund-level Superannuation Statistics issued in March 2018. It outlines a variety of fees that are levied by funds, including for investment, administration, advice, insurance, exit, switching, activity and others.
But unless you are willing to put in a fair bit of work to calculate the average fees paid by members, the data is virtually meaningless.
The Government’s Moneysmart website lists six comparison websites that contrast super funds, but warns that they do not always use consistent metrics, nor do they cover the full gamut of available funds.
No doubt, the fallout from the royal commission will eventually go some way towards reforming a sector that has been shown to charge exhorbitant fees.
Hopefully, this reform will be informed by the Productivity Commission draft report into the super sector released in May.
Are you surprised that the Government and regulators have been so slow to realise that some super funds have been charging higher fees than they should have? Will you shop around for a fund with lower fees?