While public interest is currently focused on the taxation implications of retirement income streams, courtesy of the recent federal budget, research by CANSTAR suggests that retirees should be equally focused on the annual fee being charged by the fund of their choice.
“Analysis of 64 account-based pension products showed a wide discrepancy in the annual fee being charged on a growth fund,” said CANSTAR’s Editor in Chief, Justine Davies.
“Based on a $400,000 account balance, annual fees ranged from a minimum of $2,000 up to just over $9,000. For retirees with a $750,000 account balance the annual fees ranged from $2,875 up to $16,970. While it may be possible that a fund’s performance could outweigh the larger cost, investors should consider that it’s easier to predict an annual fee than an annual return – and over a decade or so that discrepancy adds up to a very significant amount of money.”
| Fees | $100,000 Balance | $400,000 Balance | $750,000 Balance |
|---|---|---|---|
| Minimum | $550 | $2,000 | $2,875 |
| Average | $1,140 | $4,131 | $7,268 |
| Maximum | $2,457 | $9,095 | $16,974 |
| Source: CANSTAR, 2016. Estimated annual fees based on products assessed for CANSTAR 2016 Star Ratings. Products represented an actively managed option with a 70% growth / 30% defensive asset allocation. | |||
What retirees are looking for
Analysis of the search behaviour of more than 4,500 visitors to the canstar.com.au comparison tables indicates that whilst approximately one-third of visitors report having $250,000 or less to invest in an account-based pension, 40% of people who compare account-based pensions on our site have a balance of $550,000 and over.
And when it comes to investment options visitors were looking at following options:
- 27%: Australian Equities Index fund option
- 21%: Australian shares fund option
- 19%: Pre-mixed investment option
- 19%: International shares fund option
- 14%: Multiple options held
Which products offer outstanding value?
CANSTAR has researched and rated 64 account based pension products from 58 different providers. The following products have been awarded a 5 star rating for Outstanding Value.
Low Balance: $0 – $250,000
- ANZ
- AMIST
- BUSSQ
- Club Plus
- ING DIRECT
- Local Government Super
Medium Balance: $250,000 – $550,000
- AMP Superannuation
- ANZ
- Club Plus
- HESTA
- ING DIRECT
- Local Government Super
- Sunsuper
High Balance: $550,000 and over
- AMP Superannuation
- ANZ
- Club Plus
- ING DIRECT
- Local Government Super
- Sunsuper
Consumers can download the Account Based Pension Star Ratings at CANSTAR
For further information:
Justine Davies
Finance Editor & Commentator
Ph. (07) 3837 4151
About CANSTAR
CANSTAR provides Australia’s interactive online research service in consumer and business finance. Founded in 1992, CANSTAR Pty Limited is Australia’s researcher of retail finance information for over 250 institutions such as Banks, Building Societies, Credit Unions, Finance Companies, Brokers, Mortgage Originators, Life Companies and finance related Internet Portals. CANSTAR customers use the extensive database for competitor analysis as well as a means of disseminating their product range. CANSTAR also distributes this information to print and electronic media for publication and to Agents, Accountants, Brokers and Internet Portals for use in advising their clients.
What are the CANSTAR star ratings?
CANSTAR researches, compares and rates the suite of banking and insurance products listed below. Results are freely available to consumers who use the star ratings as a guide to product excellence. The use of similar star ratings logos also builds consumer recognition of quality products across all categories. Please access the CANSTAR website at www.canstar.com.au if you would like to view the latest star ratings reports of interest.
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