Insight

Good news on superannuation has been hard to come by lately. But there's one trend that's worth welcoming: the long-term decline in fees.

Good news on superannuation has been hard to come by lately. But there's one trend that's worth welcoming: the long-term decline in fees.

Ten years ago, someone with a super balance of $50,000 paid an average of $685 a year in management fees.

These days, this yearly bill has fallen more than 12 per cent to $600, thanks to technological improvements and mergers between funds.

The savings are bigger for people with larger balances, because the fees are calculated as a percentage of total assets.

To be fair, this is a rather paltry saving compared with the big share price falls of recent years but it's still significant. In the long term, management costs can change the value of a fund by many thousands of dollars.

As is so often the case with financial products, however, there's a catch. The decline in fees has not been shared equally among super fund members and it's ultimately up to you to ensure you're getting the best deal.

This is especially true if you belong to one of the for-profit funds, many of which are owned by big banks.

For-profit funds, also known as retail funds, have historically had the highest management fees which can exceed 2 per cent of assets under management.

This is slowly changing. Wealth managers have recently launched a series of low-cost funds, and products from Westpac, AMP and Bendigo Bank are now among the 20 lowest-fee funds, according to SuperRatings.

However, if you're a member of an established fund with higher fees, you may not be benefiting from this wave of competition.

Research from Chant West, the source of this week's graph, has found the fees on closed or "legacy" funds were up 0.89 percentage points higher than fees in current funds that are still open to new members.

Just like the banks don't necessarily give their existing customers the discounted interest rates used to win new business, super funds do not automatically put their members into lower-cost funds.

Consumer inertia and disengagement still allow some managers to overcharge on fees, despite the worthwhile push by funds to lower their costs.

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