The recent returns maybe high, but our super fees are excessive.
Australian Treasury director David Gruen has claimed that fees on superannuation are far too high, noting that we pay three times more in fees than the British.
In a speech delivered at the State of the Nation conference, hosted this week by the Committee for Economic Development (CEDA), Treasury director David Gruen has slammed the high fees Australians are paying on their superannuation accounts, comparing them to those in Britain, which are one-third of ours. Super fees currently average $726 per annum on balances of $50,000. Dr Gruen argued that the high fees were not “value for money” instead, they represented a “net drain for investors”. The sum total of our high fees is a mind-blowing $20 billion per year. Dr Gruen claims that a reduction in such fees would be a “significant and worthwhile reform” with “widespread benefits” for society as a whole. He also referred to the Grattan Institute Report which proposed a regular recurring tender for a default superannuation fund, to be appointed by the Federal Government, with the aim of reducing fees for a majority of superannuants. Such a reduction could lead to an increase of $80,000 for a 50-year old worker, which could mean the difference between claiming a pension or not.
Read Fairfax journalist Peter Martin’s take on super fees
It’s no secret that most Australian superannuants (i.e. almost all those who have a job) are paying far too much in fees. As Dr Gruen has highlighted, we are paying hundreds of dollars on an annual basis, for amounts as low as $50,000. When this amount is totalled and the sums are done on compound savings lost, this makes a significant difference to our final retirement savings and our ability to lead a reasonable life in retirement.
So why is this so? Here’s a clue – the superannuation ‘industry’ is worth $1.8 trillion. As Debbie noted earlier this week, some 80 per cent of our financial planners are working for the Big Four Banks or AMP, with investment in super a large part of their activities. This is the VERY big end of town. So major financial services companies, including our biggest funds, stand to lose a lot if fees are lowered. Add to this the apathetic attitude most Australians have towards their super – ‘she’ll be right mate, no need to check the annual statement’. Well she won’t, and there is.
Dr Gruen has highlighted a major flaw in our retirement income system – but waiting for a government to tackle this is not going to be productive. We all need to check our balances, our fees and either challenge them if too high – or move our business to a low cost super fund.
What do you think? Do we pay too much in super fees? If so, how can we change this?
Join YOURLifeChoices, it’s free
- Receive our daily enewsletter
- Enter competitions
- Comment on articles