Shave fees to increase retirement savings
Excessive fees are tearing large chunks from the retirement savings of many Australians, according to a recent Grattan Institute reporti.
The research paper, “Super sting: how to stop Australians paying too much for superannuation”ii, reveals that Australians are paying an average of 1.2% in fees on their superannuation account balances, and this is more than triple the median OECD rate.
The upshot for a 50-year old Australian, according to the Grattan Institute, is that his or her super balance will be reduced by almost $80,000 in fees (in today’s dollars) at retirement.
The potential impact for a 30-year old is even grimmer, with excessive fees set to chew up to $250,000 in retirement savings.
Grattan Institute Productivity Growth Program Director Jim Minifie says costs are too high because the system wrongly assumes that choice in the market will drive enough account holders to choose low-price funds, thereby forcing others to lower their fees.
The report recommends two reforms to reduce the cost of superannuation: creating a new low-price default fund for new job starters, and using the tax return process to allow taxpayers to match their fund against the new fund — and to be able to switch on the spot.
But such reforms are in the future and for now, Australians would be better served checking in with a fee rebate service.
“Rebate research services enable customers to claim a rebate for a portion of the fees charged by retail superannuation funds, allocated pensions and so on,” says InvestSmart CEO, Ron Hodge.
“The amount you receive back every year could make a significant impact on your savings and ultimately the lifestyle you can enjoy in retirement – let’s face it $80,000 could fund plenty of overseas travel once you hang up the work boots.”
ihttp://grattan.edu.au/publications/media/post/time-to-save-australians-from-the-10-billion-super-sting/
iihttp://grattan.edu.au/publications/reports/post/super-sting-how-to-stop-australians-paying-too-much-for-superannuation/
Frequently Asked Questions about this Article…
Excessive fees are a concern because they significantly reduce the retirement savings of Australians. According to a Grattan Institute report, Australians pay an average of 1.2% in fees on their superannuation accounts, which is more than triple the median OECD rate. This can lead to a reduction of up to $80,000 for a 50-year-old and $250,000 for a 30-year-old in retirement savings.
Superannuation fees in Australia are notably higher compared to other countries. Australians pay an average of 1.2% in fees, which is more than three times the median rate of OECD countries. This highlights the need for reforms to reduce these costs and protect retirement savings.
The Grattan Institute suggests two key reforms: creating a new low-price default fund for new job starters and using the tax return process to allow taxpayers to compare their current fund with the new fund and switch if desired. These reforms aim to lower the cost of superannuation for Australians.
Australians can reduce their superannuation fees by using fee rebate services. These services allow customers to claim a rebate on a portion of the fees charged by retail superannuation funds, which can significantly impact their savings and improve their retirement lifestyle.
A fee rebate service enables superannuation holders to claim a rebate on a portion of the fees charged by their funds. This can lead to substantial savings over time, enhancing the amount available for retirement and potentially funding activities like overseas travel.
High superannuation fees can have a severe impact on a 30-year-old's retirement savings, potentially reducing their savings by up to $250,000. This underscores the importance of seeking lower-fee options and utilizing rebate services to maximize retirement funds.
The current superannuation system fails to lower fees because it incorrectly assumes that market choice will drive account holders to select low-price funds, thereby forcing others to reduce their fees. This assumption has not led to the desired reduction in costs.
A fee rebate can significantly impact your retirement lifestyle by increasing the amount of savings available. For example, reclaiming $80,000 in fees could fund extensive overseas travel or other retirement activities, enhancing your quality of life after retirement.
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