With many older Australians worried about the possibility of private health premiums increasing by up to 12 per cent next year, the fact that super fund fees rose by 10 per cent on average last year seems to have gone under the radar.
Australians are paying up to $32 billion a year in super fund fees, new research from Rainmaker Information has found, with the 10 per cent increase in fees outpacing inflation by almost four-fold.
The 2018 Rainmaker Fee Study analysed more than 2500 fee options offered through 550 superannuation products representing 20 million member accounts.
It found that the average superannuation fund member is paying 1.23 per cent of their account balance in fees, up from 1.16 per cent in 2017. According to Rainmaker data, the average MySuper Total Expense Ratio (TER) is now 1.2 per cent, meaning for every $100,000 in superannuation, members are paying up to $1200 in fees – equivalent to two thirds the average household electricity bill in Australia.
Around two-thirds of those fees fund investment management, with the remaining going towards administration.
The research underlines the importance of understanding how fees work and, armed with this knowledge, fund members can shop around for better deals.
“These changes have dramatically changed the comparative sticker price fees across the market with retail funds offering many of the lowest price MySuper products available,” said Alex Dunnin, Rainmaker’s research and compliance executive director.
Mr Dunnin explained that advertised headline fees might be lower for some products, but by looking at administration and investment components separately, customers can get a better idea of where their money is going.
“Products offered by not-for-profit funds still have administration and member fees that are on average 50 per cent cheaper than retail funds, but the fees for investment offsets this advantage,” said Dunnin.
“However, investment fees vary according to what investment option the member takes up. Many funds offer low-cost index options as well as higher cost more active diversified options. Ultimately, fees – particularly investment fees – should be seen in light of net investment returns and risk.
“Despite what some super fund members may think, superannuation is now a highly competitive marketplace. If members do even a little shopping around they might be surprised how much money they can save doing something as simple as swapping their super funds.”
Do you know how much in super fees you pay each year? Have you ever looked into switching your super fund? Did you notice that your fees increased by 10 per cent last year?
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