Keep a keen eye on your fees
Australian superannuation fund fees and costs are back under the microscope, which comes as no surprise as they really do matter when it comes to your future wealth.
It means super fund members are keeping a sharper eye than ever on fees to ensure they don’t eat up too much of their hard-earned retirement savings.
Superannuation funds can charge different fees, which can all affect account balances.
A Productivity Commission super report released in December 2018 titled Superannuation: Assessing Efficiency and Competitiveness. No. 91, suggested an increase of just 0.5% a year in fees may reduce the retirement balance of a typical worker by a projected 12% or $100 000.
The Productivity Commission estimated that the fees associated with holding multiple accounts could mean 6% less for you to spend in retirement. It found, as an example, a 21-year-old on a $50,000 full-time starting salary could end up losing over a years’ worth of pay by age 67 if they had multiple accounts over their working life.
If you have multiple superannuation accounts, it could also mean multiple fees. So it is worth knowing what you are paying, and precisely what you are paying for.
What to look for
Be aware that the lowest fees are not always the best, just as the cheapest car may not be your best bet if it ranks poorly for safety and reliability.
When it comes to superannuation, a fund that charges very low fees may also provide lacklustre long-term returns, or may open your investments to high levels of investment risk. As a result, you may ultimately end up with less money at retirement than if you were with a fund with competitive fees and more stable long-term returns.
How to check your fees
QSuper chief executive Michael Pennisi said superannuation fees should be transparent and set out simply in an easy-to-understand way for customers.
One of Australia’s largest superannuation funds, with more than $113 billion in funds under administration[1] and more than 585,000 members, QSuper shows the breakdown of fees, as well as the total cost.
“We show you the total fees and costs that apply to your account to help you understand exactly what you’re paying for,” Mr Pennisi said.
Breakdown of QSuper fees and costs
Fees include an administration fee, which covers the cost of managing a member’s super including account management, member communication and member education. QSuper’s capped administration fee includes the cost of the in-house Contact Centre, education seminars, and services such as over-the-phone advice.
There is also an investment fee that covers the costs of investing your money into assets. QSuper’s investment fee covers an investment base fee to manage the investment groups within each investment option, as well as an investment performance fee made to investment managers for generating positive returns on their investment groups. The fee amount will vary for each investment option.
The final fee is the indirect cost ratio. This includes costs that were not included in the investment fees, like brokerage and stamp duty, as well as some operational costs of managing investments. The amount of these costs will vary for each investment option.
Low fees
QSuper members benefit from one of the lowest administration fees in the country, according to the Chant West Super Fund Fee Survey, March 2019.
Mr Pennisi said as a profit-for-member fund, QSuper believed in keeping fees low.
QSuper has an annual cap of $900 on administration fees.
To protect your super from unnecessary fees, QSuper also charges no fixed weekly fees or buy-sell spread fees. It does not charge any fees to switch your investments or make withdrawals.
To learn more about QSuper’s fees click here.
