Superannuation can define our retirement, so it pays to ensure you can maximise your asset.
While there are many ways to maximise your returns, such as salary sacrifice, recent research shows that many Australians are failing in one vital part of their financial education.
New research commissioned by Vanguard Investments Australia (Vanguard), conducted by CT Group, has found 61 per cent of Australians are not aware their superannuation fund is charging them multiple fees, with one-third (34 per cent) having never reviewed or compared fees across funds.
“Australians will be shocked to find out how much is being drained from their retirement savings through fees,” Vanguard managing director Daniel Shrimski said.
No avoiding fees
All super funds charge fees, it’s how they pay themselves.
And probably when you signed up for super all those years ago, the fees were the last thing on your mind. But they can be a considerable drain on your balance.
Super funds love charging fees, they will charge you administration fees, investment fees, transaction fees, insurance premiums, activity fees and performance fees. So. Many. Fees.
You think we’d know about how much our super fees are costing us, but according to the above research only 1 per cent of Australians are aware they are being charged multiple fees.
And as the vast majority of Australians have some sort of super account that all adds up. According to data by Rainmaker, despite super fund fees falling to a ‘record low’ in 2023, we still paid over $32 billion in fees.
Fees are deducted as a dollar amount or percentage of your fund balance, usually monthly, which is not great, when generally super only gets paid quarterly.
Confusing and unclear
“Regulatory guidance exists for disclosure documents or a fund’s MySuper dashboard, but when it comes to how fees are presented on websites, social media and in advertising, there is no consistency. It’s confusing, unclear, and impossible to compare,” Mr Shrimski said.
“By keeping fees confusing, it’s taking advantage of the low engagement and financial literacy of Australians when it comes to their superannuation.”
“We want to see greater transparency when it comes to fees – for example, rules around marketing ‘low cost’ funds and greater awareness of and enhancements to the ATO’s Your Super tool so it’s easier for Australians to compare total fees.”
“We’re also keen to see the industry move towards communicating a transparent combined fee that members pay, rather than only citing one type of fee.”
The study also found:
- two in three Australians are not aware their super fund charges them multiple fees
- one-third of Australians have never reviewed or compared super fund fees
- one in two women are unaware how much they pay in super fund fees
- a higher cost superannuation fund could cost a typical full-time worker around 12 per cent of their super balance – or $100,000 – by the time they reach retirement.
The survey also found half of Australians said they’ve never switched superannuation provider. However, after being told about the possible long-term savings they could achieve for their retirement, 72 per cent said they would consider switching to a lower-fee fund.
“The amount being paid in fees can make a big difference to how much you have when you retire. That’s why it’s so important Australians are given all the information they need to make fully informed decisions and are able to easily compare and select a fund that best suits them and their circumstances,” Mr Shrimski said.
So what can you do?
To check if you are paying too much in fees, your first stop is the Australian Tax Office’s Your Super comparison tool. It’s free and relatively easy to use. Find the tool here.
If you want to take a deep dive, there are other free or for-a-fee comparison sites on the internet or you could consult a financial planner.
Your Super will also compare how your super fund is performing overall.
Super downgrade
This all comes as Australia’s superannuation system has experienced a slight drop in global rankings, according to the latest Mercer CFA Institute Global Pension Index (MCGPI) report.
Australia now ranks sixth globally, down from fifth place in the previous year.
The MCGPI evaluates pension systems based on three key factors: adequacy, sustainability, and integrity. Despite Australia maintaining a high score in integrity, concerns around adequacy and sustainability have affected the ranking.
The report suggests that introducing a government superannuation contribution for primary carers of young children could help improve Australia’s adequacy score.
Do you know your superannuation fees? Would it affect your investment decisions? Why not share your experience in the comments section below?
