How to check your super fund's fees and performance
There is no point in paying high fees to your superannuation fund because there are plenty of low-cost superannuation funds that perform really well.
Lower fees allow you to save more every year and those savings compound over time so you have more money in retirement.
You can find out about your fund's latest performance and its fees on its website or call and ask your fund.
Understanding super fees
On the website, be prepared to wade through pages explaining and outlining the fees. UniSuper and AustralianSuper, for example, both have an eight-page fees document.
This is because there are a number of different fees: administration, investment (sometimes including performance fees if the returns reach a specific hurdle), transaction, trustee fee and brokerage.
There are also fees for automatic insurance cover and optional financial advice.
Fees add up
Fee amounts might sound small, but they add up and are significant over time.
For example, if you are paying 2% in fees, instead of 1%, you would have 20% less in your superannuation nest egg over 30 years. For example, you would have $160,000 instead of $200,000.
Different investment options typically have different investment management fees.
For example, AustralianSuper's balanced option charges an investment management fee of 0.50% (including a performance fee) compared a cheaper fee of 0.10% for the indexed diversified option. If you want to hold some of your superannuation in cash, AustralianSuper charges 0.09%.
As well as well as investment fees, there is an administration fee that typically is made up of a flat fee and a percentage of assets fee.
What APRA says about fees
The regulator of employer superannuation funds, APRA, investigates funds' performance and fees every year, says it is the administration fees that vary significantly between funds.
APRA found that the administration fees of 48 super funds (out of 163 super funds with $292 billion worth of assets) have 'significantly high' administration fees.
APRA points out: "Persistently high administration fees and costs erode the balances of members that compound over a long period of time, which will ultimately be detrimental to members' retirement outcomes."
MySuper products have a median administration fee of $143 per annum for a $50,000 fund but APRA found some choice products are charging a median of $350 per annum.
Features don't equal better returns
APRA points out that larger funds tend to charge lower admin fees as their scale drives down costs. APRA says that fund members using a platform, pay higher fees and should be sure they are really utilising all the features. Features on platforms don't give members better performance.
"More than half of all platform trustee directed products are failing to meet the benchmark."
Fees such as personal financial advice fees and insurance will depend on how much financial advice a member requests and the level of insurance cover.
For example, most superannuation funds offer a basic level of insurance cover automatically, but it probably isn't enough to cover costs for your dependents such as the mortgage and living costs if something happened to you.
Future performance is unknown and choosing a fund based on performance doesn't guarantee it will continue to deliver. APRA found that 80 of 604 superannuation options delivered significantly poor investment return over eight years.
To see how your fund compares, some superannuation funds provide a free third-party fund comparison tool online that takes into account fees and performance. For example, Aware Super uses Chant West.
Vote with your feet. If you realise your superannuation is charging high fees for features you never use, move funds.
Similarly if the investment performance over the long term doesn't match median fund returns or more, do you know why that is and if it is likely to continue? But before you move make sure you don't give up good insurance arrangements that may not exist in the new fund.
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