Australian superannuation fees and costs explained

A small percentage point difference in the amount you pay in fees can make a big difference to the amount you end up with to help fund your retirement, so now might be a good time to take a look at the fees you are being charged.

What are the different types of super fees?

Super funds charge a range of fees, which are usually deducted from an account’s balance, and there are a variety of fees that are commonly charged. It is important to note that you shouldn’t be charged exit fees for moving all or part of your super balance to a different fund. Exit fees were banned by the Federal Government in 2019.

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Administration fee

Administration fees are charged by super funds to cover the general cost of managing your super account. This can cover expenses like the super fund’s call centre service and the cost of issuing annual statements.

Super administration fees can be charged as a fixed fee, as a percentage of your account balance, or as a combination of both. Many super funds cap the total administration fees that can be charged in a year.

Additionally, if you have an account balance below $6,000, your administration and investment fees are capped at 3% of your account balance.

Investment management fee

An investment management fee covers the costs of managing your investments. This may cover fees paid to investment managers and amounts paid to external parties, such as brokers and government authorities.

It’s usually charged as a percentage of your super balance and can vary based on your choice of investment option. In some cases, the investment management fee may also include a performance fee.

Performance fee

Some super funds charge a separate performance fee once certain targets have been exceeded. Generally, fees are calculated as a percentage of the investment returns that exceed an agreed level of return, and are often capped at an upper percentage limit.

Advice fee

While most super funds offer general advice for free, a one-off fee may be charged for personal advice provided about your super and other investments by an adviser.

Investment switching fee

Some super funds charge a fee for switching your investment option. For example, if you were to switch from a balanced investment option to a high-growth one or vice versa, you may be charged a fee.

Some funds may charge a buy/sell spread fee, instead of a switching fee.

Buy/sell spread fee

When you make contributions, withdrawals or switch your investment options, you are buying or selling investment units. Buy/sell spread fees cover the difference between the buying and selling price and are charged by some super funds.

The types of fees and the amount charged varies depending on the super fund and product, so read your annual statement to find out how much you are paying. You’ll also be able to find the fees on the super fund’s website.

If you have more than one super account, you may also be paying fees on both accounts. If this is the case, you might want to consolidate your super into one account. Before you do so, check with your current super funds to see if there are any related costs and any insurance cover you might lose if you switch funds.

Some people will automatically receive life insurance through their super. Life insurance premiums are taken out of your super balance, which will appear in your statement.

It can be a good idea to consider the coverage offered to understand what you are receiving and whether it suits your needs. You may have an option to increase coverage by contacting your super fund, and you can opt out of this insurance if you choose.

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What difference can super fees make to my retirement nest egg?

The fees you pay today and over the course of your working life can significantly affect your superannuation balance at retirement.

As a hypothetical example, Canstar looked at how the super balance of a 25-year-old might change by their retirement, depending on whether they paid fees of 0.75% or 1.50% of their account balance per year.

This was based on an average starting income of $79,976 and average investment returns of 6.7% per annum.

In this scenario, someone paying 0.75% of their super balance in fees per year would have $96,700 more at retirement age of 67 compared to someone paying 1.50% of their balance in fees.

Superannuation fees comparison: the difference fees can make

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Source: www.canstar.com.au. Prepared on 29/07/2024. Scenario begins at the start of the 2024-25 financial year and is based on a 25 year old with a starting balance of $22,936 (per APRA Quartery Superannuation Industry Publication), starting gross annual income of $79,976 (per ABS Characteristics of Employment – median full-time employee earnings), and retiring at age 67.  SG Contribution amounts per Government announced rates, and along with the salary sacrifice and monthly after-tax amounts, are assumed to be paid into superannuation fund quarterly.  Employer contributions are assumed to be taxed at 15%.  Gross investment returns assumed to be 6.7% p.a. based on the 10-year average annualised rate of return per APRA Annual Superannuation Bulletin (June 2024). Average life and TPD insurance premium of $181.74, is assumed charged at the end of each year based on default cover available for a 25 year old on Canstar’s database. Annual income, insurance premiums, salary sacrifice and extra after-tax contributions are assumed to increase with inflation each year. Inflation is assumed to be 2.5%p.a. due to the rising cost of living (CPI Inflation) plus a further 1.5%p.a. due to the rising community living standards.  End balances at retirement and total salary sacrifice amounts are shown in “today’s dollars”, i.e. they have been adjusted for inflation. End balances at retirement are also rounded to the nearest $100.  Please note all information on income and superannuation performance returns are used for illustration purposes only.  Actual returns and the value of your investment may fall as well as rise from year to year; this example does not take such variation into account.  Past performance is not a reliable indicator of future performance.

Choosing a super fund that’s right for you can make a significant difference in the long run. But keep in mind that past performance is not a reliable indicator of future performance.

You can compare super funds based on annual costs using Canstar’s comparison tables. Before making any decisions about your super, though, you may want to seek some independent professional advice.

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