Research group SuperRatings says fees for retail superannuation funds have dropped significantly during the past 12 months.
Fees on the super funds provided by banks, insurers and master trusts have dropped about 5 per cent in the past 12 months to 1.9 per cent on a $50,000 balance. Three years ago fees on retail funds were about 2.4 per cent, representing an overall drop of 21 per cent in three years.
SuperRatings says fees for non-profit funds - which include industry funds, public sector funds and corporate funds - have remained flat at 1.1 per cent.
The researcher uses a $50,000 account balance for its calculation, as that is the amount funds are required to use when disclosing fees in their product disclosure documents (the figure is also closer to fund members' balances than, say, $100,000).
The research manager at SuperRatings, Kirby Rappell, says retail funds have been introducing cheaper products to compete with low-fee industry funds.
They are also anticipating the introduction of "My Super" legislation, under which employers will have to select a default super option that meets its criteria, such as low fees. The "My Super" default will not be allowed to pay commissions for financial advice from members' accounts as occurs now with retail funds.
Non-profit funds are generally cheaper than retail funds, mainly because they do not pay commissions and because of their lower administration fees. The investment returns of non-profit industry funds have also been higher over the long term because they are more active in their asset allocations.
They are also more prepared to change their asset allocation when market conditions change than their retail counterparts. It's the return to members after all costs that matters.
SuperRatings reports returns with the commission payments and administration fees deducted from the investment returns. Its data shows non-profit industry funds produced an average annual return, net of fees, to March 31 this year of 5.86 per cent over the past 10 years, compared with a return of 3.56 per cent by retail funds. While nobody knows for sure what investment markets will do, fund members can at least establish if the fees on their fund are too high.
While pricing among the big non-profit funds tends to be similar, the difference in fees is larger among retail funds.
All fund members should make the effort to review their funds.
High-fee funds are not always bad - it may offer more investment choices - and high fees can be more than offset by even higher returns, leaving the member better off than a low-fee, low-return fund.
Another important consideration before switching funds is to check the insurance cover. Many funds have automatic acceptance for insurance up to certain amounts whereby members are covered by death and total and permanent disability insurance without having to undertake a medical examination or disclose health information. The new fund may not have automatic acceptance or may have a lower level of cover for which there is automatic acceptance.
Frequently Asked Questions about this Article…
What has happened to superannuation fees for retail funds recently?
Research group SuperRatings says fees for retail super funds (those run by banks, insurers and master trusts) have fallen — about a 5% drop in the past 12 months to around 1.9% on a $50,000 balance, and down from roughly 2.4% three years ago (an overall 21% fall in three years).
How do non-profit (industry) super fund fees compare to retail fund fees?
SuperRatings reports non-profit funds — including industry, public sector and corporate funds — have stayed flat at about 1.1% on a $50,000 balance, which is generally cheaper than retail funds that tend to charge higher and more variable fees.
Why are non-profit super funds often cheaper than retail funds?
Non-profit funds are typically cheaper because they do not pay commissions, they have lower administration fees, and they tend to be more active and flexible in asset allocation — factors that can lower costs and improve long‑term net returns to members.
What is the $50,000 benchmark SuperRatings uses and why does it matter?
SuperRatings calculates fees using a $50,000 account balance because funds are required to disclose fees for that amount in product disclosure documents and it better reflects typical member balances than higher benchmarks such as $100,000.
How have net returns differed between non-profit and retail super funds over the long term?
According to SuperRatings, over the 10 years to March 31 this year non-profit industry funds delivered an average annual return net of fees of 5.86%, compared with 3.56% for retail funds — illustrating how fees and investment decisions affect returns to members.
Should I switch funds just because another fund has lower fees?
Not automatically. While lower fees can boost long‑term balances, high‑fee funds might offer broader investment choices or higher returns that offset costs. You should compare net returns, investment options and other features before switching.
What should I check about insurance if I consider switching super funds?
Check the new fund’s automatic insurance acceptance and cover levels. Many funds provide automatic death and total & permanent disability cover up to certain amounts without medical checks; a new fund may have lower automatic cover or require medical evidence.
How can everyday investors check if their super fund fees are too high?
Review your fund’s fee percentage (using the $50,000 disclosure if available), compare net returns after fees with peers, consider whether you’re getting value from extra services or investment choices, and assess insurance cover before making any change.
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