Account Based Pensions: Watch the cost

CANSTAR has researched and rated 64 account based pension products from 58 different providers to determine which funds are offering outstanding value for money.

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 Outstanding Value Account Based Pensions 2016CANSTAR 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

justine.davies@canstar.com.au

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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COMPLIANCE DISCLOSURE and LIABILITY DISCLAIMER

To the extent that the information in this report constitutes general advice, this advice has been prepared by CANSTAR Research Pty Ltd A.C.N. 114 422 909 AFSL and ACL 437917 (“CANSTAR”).  The information has been prepared without taking into account your individual investment objectives, financial circumstances or needs.   Before you decide whether or not to acquire a particular financial product you should assess whether it is appropriate for you in the light of your own personal circumstances, having regard to your own objectives, financial situation and needs.  You may wish to obtain financial advice from a suitably qualified adviser before making any decision to acquire a financial product.  CANSTAR provides information about credit products. It is not a credit provider and in giving you information it is not making any suggestion or recommendation to you about a particular credit product.  Please refer to Canstar’s FSG for more information.
The information in this report must not be copied or otherwise reproduced, repackaged, further transmitted, transferred, disseminated, redistributed or resold, or stored for subsequent use for any purpose, in whole or in part, in any form or manner or by means whatsoever, by any person without CANSTAR’s prior written consent. All information obtained by CANSTAR from external sources is believed to be accurate and reliable. Under no circumstances shall CANSTAR have any liability to any person or entity due to error (negligence or otherwise) or other circumstances or contingency within or outside the control of CANSTAR or any of its directors, officers, employees or agents in connection with the procurement, collection, compilation, analysis, interpretation, communication, publication, or delivery of any such information. Copyright 2014 CANSTAR Research Pty Ltd A.C.N. 114 422 909.  The word “CANSTAR”, the gold star in a circle logo (with or without surmounting stars), are trademarks or registered trademarks of CANSTAR Pty Ltd.   Reference to third party products, services or other information by trade name, trademark or otherwise does not constitute or imply endorsement, sponsorship or recommendation of CANSTAR by the respective trademark owner.
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