Super fees too high

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.

CEDA website

Read Fairfax journalist Peter Martin’s take on super fees

Grattan Institute Super Sting Report

Opinion: Well said, David Gruen

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?





    COMMENTS

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    raymondp
    25th Jun 2014
    10:03am
    This story only confirms my theory that Australians are perhaps, the most sneaky, greedy, money hungry lot on this globe. Everything is jacked up so high for profits, I don't know why we have to be so apathetic and let business get away with it, and now the Abbott government is making it even worse. God help us.
    Anonymous
    25th Jun 2014
    10:16am
    Have to agree, This country is the biggest rip off place on the globe. We are conned left right and centre. Pity we are such a pathetic lot to let this happen. Take the duplication of state governments as an example. Twenty three million people cannot afford the luxury of all this beauracratic dead wood sucking us dry. No one seems to care or notice.
    Anonymous
    25th Jun 2014
    10:45am
    I post here a lot

    http://www.ozpolitic.com/forum/YaBB.pl?board=politicians

    I dubbed them 'the new robber barons' some time ago... pretty accurate if you ask me. We are in the hands of countless, serried ranks of grasping peasants who see EVERYTHING as an opportunity to make a dollar off the back of someone else, one way or another. The AWH scandal clearly shows you that, and it is massively more widespread than just that.
    Adrianus
    25th Jun 2014
    1:01pm
    There is a Union boss on every Superannuation Board. Why aren't they leading the cheer squad?
    Tom Tank
    25th Jun 2014
    1:35pm
    Sorry Frank there is not a 'Union Boss' on the board of private i.e. bank and insurance company super funds.
    You may be confused by the 'Industry' super funds such as HESTA and CBUS who were setup in conjunction with unions. These are the funds with the lowest charges and the best returns.
    It is also possible to access a financial planner through these funds but that is on the basis of a payment for that advice and a declaration by that planner of an financial gain to them from the advice you receive.
    I believe I have been well served by the Industry super fund I am in and by the financial advice I paid for.
    My unsolicited advice from me, which I give freely, stay away from the big 4 banks and any financial planner who works for them.
    MICK
    25th Jun 2014
    4:02pm
    Raymonp: Stay away from America as you will get a shock. There they pretend to be your friend because they see a business opportunity in you. Awful.
    noddy45
    25th Jun 2014
    10:19am
    And what will be done about it ? absolutely Nothing
    raymondp
    25th Jun 2014
    10:28am
    Isn't that what I said, apathetic, thats us.....
    Adrianus
    25th Jun 2014
    1:05pm
    Do you realise how difficult it was to remove Williamson from the board? This is after his conviction.

    25th Jun 2014
    10:43am
    Super funds are nothing more than yet another 'privatised' venture' - this time of pensions, though disguised as riches for the many when it is nothing of the sort. The benefits to society are manifest - more people employed to 'manage' the funds, and a few more rich 'ceos' and 'board members' sucking deeply off the cream of the takings.

    I worked out years ago that I would end up paying someone else 65-70%, in costs and taxes, of contributions. What a waste of money.
    BrianP
    25th Jun 2014
    10:44am
    Comment from Brian Parkes of the Australian Voice Party.

    The writer of this article is absolutely right. People need to cooperate together to DO SOMETHING about this. Left to themselves, the main parties will be so slow.

    There is now a Party who are set up to give a stronger voice to everyday Australians. It has taken us over a year and a lot of hard work to set up. So, no more words without ACTION. Search on the web for australianvoice and send your comments and suggestions for how you would like to change Government policy.

    Remember Australian Voice Party will only be any use if everyone supports us. Join up now and let's get some People Power going.
    Anonymous
    25th Jun 2014
    10:48am
    Unfortunately, I am not a follower - nor do I compromise on principle - both of which are the meat and drink of politics. I will view your policies though.... but I am on the verge of launching a new party myself.
    Adrianus
    25th Jun 2014
    1:03pm
    I am thinking of launching a party as well.
    Polly Esther
    25th Jun 2014
    1:47pm
    Yes Brian you are like a blow fly, except you can swat them. Election looming?
    KSS
    25th Jun 2014
    3:41pm
    Another party political broadcast!
    Patriot
    25th Jun 2014
    4:00pm
    Yet another party???
    Remember the principle of: "Divide & Conquer"?

    The main parties certainly understand this principle to well and know, that in order to remain in power, they must entice the rest of us to NOT AMALGAMATE as a united force and so be able to for an EFFECTIVE & EFFICIENT BLOCK AGAINST THEM!!!
    BrianP, The Grappler and other new parties why cannot you guys agree to form ONE MAIN PARTY whose constitution ENSURES that we "The People" are educated to keep your guys honest and get the population involved in the processes of Governing.
    Get the masses thinking independently again!!!
    MICK
    25th Jun 2014
    4:04pm
    BrianP: "Stronger voice"???? What does that mean? Sounds like the sort of political electioneering bullshi* which we are all fed up with.
    Do yourself a favour and TALK FACTS, MAKE PROMISES which you will keep if elected and stop taking everybody for fools.
    Adrianus
    26th Jun 2014
    3:47pm
    More bass? G-7?
    Rosscoe
    25th Jun 2014
    11:59am
    Yet another example of ordinary Australians being ripped off by these shysters! I expect my parliamentarians to take up this issue. Now that my fears have been confirmed, I will put in on the next agenda of the next ALP meeting I attend. I certainly don't expect the current Federal Government to do anything! They won't upset their mates!
    rob101
    25th Jun 2014
    12:30pm
    Try Industry funds,I am with LUCRF,no fees,also with ME bank,no fees free access to ATMs also.

    robert101
    Cuddles
    25th Jun 2014
    12:53pm
    Rob - with LUCRF, you are paying fees. The "My Super" option, which is the default, you are paying $78 pa member fee and 0.67% MER. On $50,000, this equates to $423 pa in fees
    Adrianus
    26th Jun 2014
    3:16pm
    rob101, I find it hard to believe their are no fees.???
    Tim@toc
    30th Jun 2014
    7:44pm
    Not quite true rob101. Unless you live close to a Westpac or associated ATM you will cop a minimum $2.50 ATM fee. Too bad if you live in the bush. And Industry funds do all have fees, albeit much lower than retail funds.
    retroy
    25th Jun 2014
    12:40pm
    Could not agree more.
    When I was in an industry super fund after I left the work force I thought my super fund, Sun Super, was pretty good, and then they jacked up the fees by 1100% and when I protested they laughed.
    Consequently I set up a self managed super fund and have been laughing myself ever since.
    Mind you, admin fees are creeping up with all the Government mandated requirements such as actuary reports and tax preparation.
    Did you see the article on "money Manager how insurance companies are gouging at renewal time.
    I switched my insurances and saved almost 30% because they tried to put up the premiums at renewal time.
    No doubt about it this is a rip off country and nothing is done.
    Adrianus
    25th Jun 2014
    1:14pm
    retroy I agree. When you add in the tax, auditors fees, etc. etc. it is almost not worth the trouble.
    retroy
    25th Jun 2014
    1:51pm
    Frank
    You still have to pay tax while in accumulation phase even if its not in self managed super.
    When you go into Pension phase then whoopee, no tax!
    Adrianus
    25th Jun 2014
    3:14pm
    Yep, OK you have a point. There is a light at the end of the tunnel.
    Abby
    26th Jun 2014
    12:02pm
    I was under the impression they were talking about changing that
    Adrianus
    26th Jun 2014
    3:21pm
    Yes *Abby, I think the ALP wanted to apply a tax when in pension phase. It made a lot of people nervous but nothing came of it.
    tj
    25th Jun 2014
    12:59pm
    Certainly pays to shop around ,i found a super comparison site on the net ,currently equip super charge me about $1500 PER ANNUM for allocated pension ($1750 in the fund) Rest super want about$1000 for same product ,naturally will swap,must be lots of people who dont study all the terms ,must admit i didnt until i retired and had plenty free time to research all super,powerbills,insurance etc.ESPECIALLY HOME INS.when renewal comes in found i can negotiate premiums, try it and see
    retroy
    25th Jun 2014
    1:47pm
    Interesting that they would negotiate, because mine wouldn't, even when I said I might have to go elsewhere.
    So I went elsewhere but you are right it is time consuming and I would not have had the time while working, but the great rip off was not in place then as it is now.
    Ballgameskeith
    25th Jun 2014
    1:38pm
    Its also worth checking the fees on your account based pension (or similar). Same types of companies administering them as per the super. You do not have to stay with the same company when you move your money over from the accumulation stage to the time to SPEND it stage.
    rob101
    25th Jun 2014
    2:37pm
    just a note to Tom Tank.EVERYTHING that workers enjoy eg.Annual leave ,Leave loading,Superannuation,sick leave,long service leave ,parental leave Compasionate leave Work cover OH&S etc were brought in by unions.
    KSS
    25th Jun 2014
    3:39pm
    Yet again this is a case of Caveat emptor! Unfortunately most people take a 'set-and-forget' attitude to superannuation. They probably barely look at the statements when they get them. Its only when they need to start drawing on it that the realities actually dawn.

    Retail funds will likely always have higher fees than industry funds; but even in industry funds you still have to be vigilant. And not just on the admin fee. How many people know where their money is invested? How much are they paying for life insurance, income protection available through their fund? How many people know that you may not be able to leave the balance of any fund to whoever you choose when you die even if you die before retirement?

    We can and probably should review our super fund arrangements at least annually and make changes where necessary. That goes for everything, car insurance, house & contents insurance, health insurance, utilities and phone suppliers etc etc. Whinging about high fees and charges will achieve nothing. It is also not the province of any level of Government to take care of my personal affairs.

    I am a grown-up and no longer need a Nanny!
    MICK
    25th Jun 2014
    4:05pm
    Good one KSS. You are on the money.
    Star Trekker
    25th Jun 2014
    3:56pm
    I have a Retirement Savings Account in lieu of Superannuation. Super Guarantee goes into it and any spare cash while I was working. All for $35 per year if over $1000. I love flat rates.
    Adrianus
    25th Jun 2014
    5:04pm
    Star are they a good idea for the long term?
    MICK
    25th Jun 2014
    4:00pm
    When you travel overseas you begin to realise how expensive a lot of things are in Australia.
    To give readers an idea: first there were life insurance salesmen, then they move on to mobile banking. And now we have the next wave from the white shoe brigade.....superannuation professionals.
    So move to an industry fund. These are cheap and have been amongst the top performers. Or better still manage your own if you are capable of doing this.
    For those too apathetic to bother you get what you get.
    Cuddles
    25th Jun 2014
    10:16pm
    Having a chuckle. So im from the "white shoe brigade"...lol. I am a superannuation professional. I have a Dip of Super Management from Macquarie uni & Dip fin planning from Deakin uni. Ive spent the last 30 yrs in the super industry ranging from fund secretary & trustee of 2 very large employer funds and for the trustee of the 2 largest industry funds in senior capacities to name some of my roles. So where's my white shoe......lol :)
    Adrianus
    26th Jun 2014
    3:12pm
    mick, I see the TV ads as well while I'm trying to watch NSW bash the living daylights out of QLD. The difference is I don't repeat it because advertising only works if you want it to. mick, you've got to have your wits about you buddy. Those white shoes will get you! HA HA!! Nice one Cuddles.
    Patriot
    25th Jun 2014
    4:02pm
    Just wait for the next financial crash coming to "A Place Near all of us Soon"!
    Then watch all wealth in the superfunds transfer to the banking cartels.
    MICK
    25th Jun 2014
    4:06pm
    Do you mean the "wealth" which has not been wiped out? Good time to buy methinks.
    rob101
    25th Jun 2014
    4:30pm
    cuddles,yes there is a $1.50 a week admin charge.FEES ARE DEDUCTED FROM THE GROSS EARNINGS OF THE FUND>NOT YOUR ACCOUNT!
    COMMENT!
    rob
    Cuddles
    25th Jun 2014
    9:48pm
    Umm i thought u said you paid no fees in lucrf. So an admin charge is not a fee????

    the article talks about an average fee of $726 on a $50k account. Ive read the report this article refers to and transcript of the speech and the $726 includes the MER

    yes, MER's are dedducted from earnings before they are credited to your account, but they are still fees you are paying by forgoing earnings
    Anonymous
    26th Jun 2014
    8:08am
    You are quite correct in what you say Rob...the fees ARE deducted from the GROSS earnings of the fund, not the individual account, but you do pay the admin fees.
    Cuddles
    26th Jun 2014
    7:29pm
    As I said in a comment below - so by your definition, if im in a retail fund that has no admin or member fee directly deducted from my account and the only fee is the mer deducted from earnings, then am paying no fees. (by the way trail commission in retail funds are included in mer). YIPPEE. Therefore most retail funds are fee free and are cheaper than industry funds as most retail funds have no member/admin fee and only charge mer
    Not Senile Yet!
    25th Jun 2014
    5:51pm
    We can change that by Not Voting in any more Party Machine PUPPETS!
    Then remove our compulsory Super from the Funds who overcharge......simply re-direct it elsewhere/other super funds who offer a better deal!
    Or as suggested...if able and have the time....move it to a Self-Managed Fund......just as the Fat Cats have done!
    But best of all...check the Insurances on your Super Fund.....mine recently upped their premiums for Life and Income Protection by 85%.....blaming increased claims! What a load of crock....a friend works for a big Insurance Company and told me that they calculate in advance your probability to claim ....so they already have calculated to allow for increased claims.....This is just a rort to lessen their losses!
    Most people do not realise that these insurances are optional....you can stop them if you so desire....they are nominal.....not compulsory!
    also most people are unaware that you cannot claim for more than one Income Protection Insurance at a time. This means if you have more than one.....it is a waist of money!
    These Super Funds make the whole process very complicated deliberately so you just don't bother or give up!
    It is a direct Copy from the USA Insurance Funds which a brilliant at Gobble de Gook to confuse their So-Called Customer.....till he makes a claim......then it all unravels that the Insurance Policy isn't worth the Fees you paid.
    If they can't raise the base cost....then they start adding to the list of exclusions and extend the Waiting Period to 90 or 120 days before you are able to Claim.
    You are better to pay the money to yourself into a Separate Account, it adds up faster than you think!
    Also be Aware!...The Government.....controlled by the Party Machines.....has fiddled and fiddled with our Super continuously and are still doing so. It might be your Money,,,....,but they control when your get and how much you can have.......It's no wonder everyone just cashes it in and skidoodles.
    Only the Government is saying that they spend it on Lavish Holidays.......must be their fellow retired fat cats their referring to.....because most I know do it to stop the Government from controlling what is rightfully theirs!
    Very few go for the world cruise.....what a lot of piffle!
    Most pay out their mortgage or pay out their kids mortgages or set money aside in a trust for their grandchildren's education!
    When Super started it was a great deal....why?
    Because if you got sick or retrenched when over 50 you could access it to rebuild.....update your skills etc.
    But one by one the Party Controlled Government shut that down through changes to access. Now you have be on your deathbed or bankrupt to access it before your 60......and still Abbott wants to change that to 70 now!
    Get it out now if you can.....Gee I could make a better return buying and selling Crap on ebay!
    Remember...... Vote the Party Machines out of Parliament.....they have become the new Pigs at the Troth.......remove them before it is too late!
    Anonymous
    26th Jun 2014
    8:05am
    The idea of superannuation is to support you in your old age. It is not meant to be there to go on cruises, pay out mortgages etc.
    Also I heard this morning that 20% is what should be going into your super fund not the current amount of 9% (I think it is). People will not have enough to support themselves if they do not contribute more.
    MICK
    26th Jun 2014
    4:19pm
    Radish: You are trying to make sense of the big superannuation con. I read the article and contacted News.com to admonish the reporter as the article is a load of hogwash. It suggested that people earning $60 000 pa should put away 20%. Perhaps you can explain how anybody on $60 000 pa can put this amount away unless they eat cardboard.
    Superannuation is one of the biggest con the rich have played on average Australians. It was sold as being worry free but with inflation there will be almost no average Australians who get anywhere near this. The system has been designed by wealthy Australians FOR THEMSELVES because only well off folk can pile money into superannuation. The reason the rich love it is that they avoid the top marginal tax rate of 48% and have the choice of paying company tax (28%) or superannuation (15%). It is a no brainer which both sides of politics support although it is a clear TAX SHELTER for the rich. As though rich Australians are not afforded a lavish lifestyle without refusing to pay real tax on the high incomes they earn.
    We are becoming more like the US every day. Warren Buffet, who I think is close to the richest man in the world, stated that his secretary paid more tax (as a percentage) than he did and that this was wrong. This is what is lining up in Australia as well. And we continue to vote Labor and Liberal whilst Rome is burning and we are all being scalped???? Give me strength....vote for an Independent and put thee crooked governments out of business!!
    Not Senile Yet!
    25th Jun 2014
    5:57pm
    Sorry about the Political Ramble....but it beats me why people give their vote to a Person who has SOLD it to invisible Party Machine members hidden in a back room.
    In short he is a puppet to the Machine....so he can get elected!
    WHY would you give him/her your vote when you know this???????
    adbob
    25th Jun 2014
    9:41pm
    In the Gillard government Chris Bowen (sadly a Ruddite but at least a genuine Laborite) put up a bill to sort this out - even to the extent of letting people who were locked into paying trailing commissions to spivs and swindlers (aka financial planners) for doing essentially nothing get out of those deals.

    The Libs tried to block it int he senate and some delay was conceded.

    When Shorten took over the portfolio it was watered down considerably.

    http://www.smh.com.au/business/shortens-flexible-approach-gets-tick-from-finance-sector-20121023-283dj.html

    Now Hockey has killed it and appointed a new inquiry with a stacked panel - eg Craig Dunn - recently CEO of AMP on the panel.

    The fox in charge of the henhouse.

    How it is that they ever got away with it all along is beyond belief - also beyond belief is that a court of law could no simply strike down these binding agreements.

    Surely a deal where someone holds out to you that they are giving you dispassionate advice, when they are actually receiving a backhander for swinging your business (often your entire life savings) to their partner in crime, can be struck down as illegal by a court.
    MICK
    26th Jun 2014
    4:21pm
    Those die hard liberal supporters need to look into the mirror and have a hard look at how dumb they are to continue supporting corruption which sees money flowing from poor to rich. But I guess when you are an addict it is difficult to see how to dry out.
    rob101
    25th Jun 2014
    10:22pm
    Hey Cuddles do you not know the difference between Gross and Net? If the fees come out of the Gross a member is not forgoing anything
    rob
    Cuddles
    25th Jun 2014
    10:39pm
    Check your next member statement, they show the fees YOU have paid individually and this includes mer. So by your definition, if im in a retail fund that has no admin or member fee directly deducted from my account and the only fee is the mer deducted from earnings, then am paying no fees. (by the way trail commission in retail funds are included in mer). YIPPEE. Therefore all retail funds are fee free and are cheaper than industry funds as most retail funds have no member/admin fee and only charge mer

    26th Jun 2014
    8:00am
    I agree with Tom Tank. For over 14 years my super fund was with the Commonwealth Bank. Moved to Hesta some 5 years ago and very, very pleased I did. Finally seeing some good results and fees lower.
    MICK
    26th Jun 2014
    4:22pm
    And you avoided the scandal which has enveloped the Commonwealth Bank in recent times. That is why rolling back protections is bad. History repeats itself you know.


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