WHAT THE CHARGES COVER
Superannuation funds charge fees for administration, investment management, insurance and member services such as advice. Some retail funds charge platform fees. Rice Warner says the growth in percentage-based fees funds member services such as intra-fund advice, life insurance and support for a growing number of retirees with higher service requirements.
“The key thing people can be doing is to make sure their administration fees are minimised as they don’t drive your return,” says Kirby Rappell, of SuperRatings.
The top-performing funds typically have low administration fees. For balanced accounts, they range from 0.16% to 2.01% on a $50,000 balance, which includes fixed dollar and percentage-based amounts, according to SuperRatings.
“For the average MySuper fund, these are $78 per year and an administration fee of 0.22%,” says Rappell. “Obviously you can get cheaper than this. Hostplus, for example, has a $78 per year fee and a 0% administration fee.”
Two other funds that charge a flat dollar administration fee and no percentage fee are AustralianSuper and LUCRF.
The other big cost is the management fee, which varies for different investment options. In the SuperRatings top 50 balanced funds it ranges from 0% to 2%. But fees aren’t the whole story. “Don’t focus on fees, focus on returns,” says Damian Hill, CEO of REST. The industry fund holds investments such as Endeavour Energy, which will produce solid, consistent returns but for a higher fee than, say, an index fund. “It is most important to get those sorts of assets in the portfolio to give a steady source of income.”
Rappell says assets such as direct prop- erty, infrastructure and private equity have been strong drivers of super fund returns.
Insurance costs are tricky to compare because the terms and benefits vary wildly. “Premiums are dependent on a lot of factors, including age, occupation, gender and level of cover,” says Rappell. “The median cost of default death and TPD cover for a white-collar male aged 40 is $262.”
He says you need to focus on ensuring the product you are in is competitive and be aware that providers often launch new products but don’t automatically transfer you across. Assess performance over the longer term.
Advice is opt-in so you should ensure the provider is well qualified. But costs here vary hugely. If you are paying commissions, why? You can find providers who aren’t doing this and are passing the savings back to their members.