Confusing fees: Why we need better transparency from super funds

Australians deserve to know what they're really paying in super fund fees.

Try this brain teaser: How much do you pay your super fund in fees each year?

If you're not sure, or you just don't know, you're not alone.

The fact is, the majority of Australians are in the dark about the cost of their super.

That's not surprising.

You're paying multiple types of fees. Yet Vanguard research shows two in three Australians aren't aware of this.

Why fund fees matter

By the time you retire, your super is likely to be your second biggest investment, just behind the family home.

However, unlike your home, super provides regular income in retirement.

It makes super a critical investment for your future.

Yet it's surprising how much of your super savings can be siphoned off in fund fees.

Last financial year, $10 billion in fees was paid to super funds collectively. Almost 90% of this was paid out of members' super balances - money that could have been invested for their retirement.

The fee drain adds up over time.

The Productivity Commission found that an increase in fees of 0.5% can cost a typical full-time worker more than $100,000 by the time they reach retirement.

So, while you may not feel any hip pocket impact from fees today, you certainly will by the time you're ready to hang up your work boots.

Why the confusion over fund fees?

It's no surprise many Australians are unsure what they're paying in fees.

Super funds are often quick to spruik low administration fees.

All funds charge investment management and transaction fees, but you could also be paying a variety of other fees including performance fees and investment switching fees.

Yet when it comes to how all these fees are presented on websites, social media and in advertising, there is no consistency. It's confusing, unclear, and almost impossible to compare between funds.

The upshot is that while you may think your fund charges competitive fees, the reality can be very different.

What do 'low fees' look like?

There is a way to gauge where your fund sits on the fee spectrum if you invest in the fund's MySuper offer. The solution is the online YourSuper comparison tool available on the Australian Taxation Office website.

It pulls together fees from over 50 MySuper products using data collected by fund regulator APRA.

A user can enter their age and super balance to get more personalised results. They can also log in to MyGov to prefill this information.

By clicking on the 'Annual fee' tab, you can see funds ranked by the fees they charge on a $50,000 balance.

The YourSuper tool shows Vanguard Super ranks third lowest for fees, with an annual fee of just $280. In practical terms though Vanguard ranks higher as at least one of the top two funds is not open to the public.

At the other end of the scale, the most expensive fund charges annual fees of $659 - a difference of $379 each year.

It's not hard to see how over 30 or 40 years in the workforce, the savings of a low fee fund can really stack up.

It's never too late to check your fund's fees

There are clear opportunities to improve fee transparency for Australians when it comes to their super. And Vanguard would welcome initiatives that would make it easier for all Australians to know what they're being charged.

Until this happens, the onus is on fund members to work out what they're really paying.

Back to that brain teaser.

If you're among the millions of people who are unsure how much your super fund is costing you each year, it's time to take a closer look.

Check your super account online. Review your most recent fund statement. Or simply pick up the phone and ask your fund.

Chances are, you're paying more than you realise.

If that's the case, it's time to think about switching to a fund with lower fees. It can see more of your money invested for the future, and after all, that's exactly what superannuation is designed to do.

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