Super funds are charging billions to invest your retirement nest eggs, yet some fees are higher than returns and some board trustees are each getting at least $100,000 a year to attend meetings.
That’s the finding of a data analysis from the Australian Prudential Regulation Authority (APRA) by Business Insider (BI).
It comes as corporate watchdog the Australian Securities and Investments Commission (ASIC) is set to receive a $70 million budget boost to allow it to embed staff into the big banks and AMP to fight white-collar crime. The enhanced powers were sought by new ASIC chairman James Shipton in the wake of revelations of illegal practices and misconduct at the banking royal commission. Yet, in the May Federal Budget, the Government announced a $28 million reduction in funding for ASIC over three years.
Meanwhile, at the inquiry which resumed on Monday for two weeks of hearings into the superannuation sector, NAB admitted that between 2012 and 2017, it charged its super customers more than $120 million in fees they didn’t need to pay.
NAB said it charged its MLC Super customers an administration fee of 1.5 per cent for the first $44,999, whether advice was provided or not.
Opening proceedings, assisting counsel Michael Hodge said: “Consumers are unable to do anything more than peer dimly through the darkness of their superannuation trustee. What happens when we leave these trustees alone in the dark with our money?”
But exposing the costs of funds was already the flavour of the day after BI released its analysis of APRA data from 2017 that covered about 26.5 million member accounts containing $1.6 trillion.
It was especially critical of the amounts that funds paid their trustees, finding 15 paid their trustee board more than $750,000 per year combined with some trustees getting $100,000 or more a year each to attend meetings.
“The APRA data shows (Hostplus) directors, who meet seven times a year, getting a combined $1,015,000 a year.”
Chris Brycki, chief executive of robo-adviser Stockspot, said: “It’s easy to dismiss this (trustee fees) cost on the basis that it’s spread across many members, but every dollar spent in salaries is one less dollar Australians can spend in retirement so it really should be scrutinised closer.
“There are dozens of super funds paying each member of their trustee boards more than the average Australian full time salary.”
BI listed the most expensive funds in terms of administration and operating costs per member. At the top was Perpetual Super Wrap, which charged $9580 a year.
“With all the advances in technology, these giant funds appear to be wilfully inefficient,” Mr Brycki told BI. “This is alarming.
“Incredibly, we found 11 funds that charge more than $1000 per member per year on operating and administrative expenses.
“Ask anyone who has tried contacting their super fund for information and you’ll hear a common story of long waiting times and canned responses that don’t answer the question. This type of service isn’t worth $10 a year, let alone $1000.”
BI was also critical of the big advertising budgets some funds set aside to attract new members. Construction and Building Unions Super spent more than $18 million on advertising, followed by Hostplus with $12 million.
“Advertising is ultimately an expense worn by members,” said Mr Brycki.
“Twelve funds spent more than $20 per member on advertising last year. What benefit do members get from this? Once funds reach around $5 billion in size there’s no evidence that increased scale from new members leads to lower investment or operating expenses.
“As more funds engage in a marketing war the result seems to be that costs increase and members are worse off.”
Do you believe your super fund has your best interests at heart? Do you believe you get value from your fees?