What Fees Do Australian Super Funds Charge?

What superannuation fees are you paying? Here we outline some common superannuation fees and charges that you might be charged on your superannuation account.

The majority of us will first be introduced to superannuation when we get our first new job and the only thing we will most likely remember is filling in the form that is provided by the new boss. But if you want to be a little more proactive, there are a few things you can consider – particularly when it comes to super fund fees.

When choosing a super fund remember that super fund fees will eat away at your savings so it pays to be aware of what superannuation fees and charges you are likely to be hit up for.

Compare Super Funds & Fees

If you’re looking for a low-cost fund, then the products displayed in the table below could be worth considering. Results shown below are based on an average super balance of $80,000 and are sorted by annual cost (lowest to highest).

Annual cost includes administration fees and indirect costs (including the investment fee, performance fee where applicable, and any other indirect management costs).Total cost is calculated based on the average super balance specified, based on the investment option considered within the Canstar Superannuation Star Ratings, 2016. Star Ratings displayed relate to the Starter consumer profile.

There are plenty of things to be aware of when you check your next superannuation statement – one of which is fees! Here are some superannuation fees to check for on your next statement:

Superannuation-fees-explained Administration Fee
Management Expense Ratio (MER)/Investment Cost
Performance Fee
Contribution Fee
Other Superannuation Fees

Superannuation Administration Fee

Sometimes known as a “management fee”, superannuation fees are charged by super funds to cover the cost of the administration involved in the daily running of your account. Based on the products researched by Canstar in 2016, the average superannuation administration fee on an account balance of $80,000 is roughly $200 per annum.

This may be a tiered fee structure where, based on your superannuation account balance you will be charged a certain percentage of the balance. This means that as your account balance grows, the dollar amount you pay as a fee may also increase.

Superannuation Management Expense Ratio (MER)/Investment Cost

The Management Expense Ratio (MER) is the fee charged by your superannuation Fund Manager for managing your investment. This fee is based on your choice of investment. The fee is usually charged as a percentage of your super balance.

Superannuation Performance Fee

This is the fee charged by fund managers that the superannuation fund engages to manage your money. It is generally charged if the fund manager exceeds the target performance for the year. Most superannuation funds will provide an estimate for the coming year rather than the exact fee. This is because fund performance is not known until the end of the year and the performance fee is based on whether or not the fund manager outperforms the market. Some of the funds include this in their MER while others show it separately in their PDS.

Superannuation Contribution Fee

This fee may be charged when you make a contribution to your superannuation account, with this fee payable to your financial adviser for his/her recommendations. Usually this fee is negotiable with your adviser and it varies from zero to 5%. This means that for every $100 paid into your account, the account may be credited with only $95.

Other superannuation fees & charges

Apart from the fees mentioned above, other fees that may be charged by some funds include an establishment fee, termination fee and other transaction fees like switching or withdrawal fees.

The basic rule that all super investors should work with is simple – the lower the fees, the higher the amount available for investment which, in turn (all else being equal) increases your super balance at retirement.

A high fee, however, does not guarantee a product with all the bells and whistles, and it’s also not necessarily true the other way. Choosing a super fund that’s right for your future needs is the key.

Canstar’s annual Superannuation Star Ratings report collates the data on the minimum, maximum and average fees across the super funds assessed.

While our most recent research found that most providers are offering competitive fees and premiums, some superannuation funds do charge quite a bit more than others.

Compare Super Funds with Canstar

What does super cost?

We’ve collated the data on the minimum, maximum and average fees across the 67 superannuation products included in our 2016 Star Ratings.

Note in particular the difference between the minimum and maximum fees in the tables below. While most providers are offering competitive fees and premiums, some providers are charging substantially higher fees and premiums – so watch out!

Profile
Average Super Balance ($) Average Fees ($) Min Fees ($) Max Fees ($)
Starter $20,000 $275 $134 $678
Builder $80,000 $838 $450 $2,322
Established $140,000 $1,406 $728 $3,966
Pre-Retiree $200,000 $1,967 $998 $5,610
Wealth Accumulator $500,000 $4,669 $2,250 $13,831
Source: Canstar
Fees include Administration Fees and Indirect Cost Ratio (including Investment Fee, Performance Fee and other indirect costs). Rounded to nearest dollar. Fees are calculated based on the average super balance specified based on funds assessed for Canstar Superannuation Star Ratings 2016.

How much do the specific types of super fees cost?

Each specific type of superannuation fee that we’ve outlined below will cost a different amount depending on your account balance.  Based on the profiles assessed by Canstar for its 2016 star ratings, we have calculated the following minimum, maximum and average fee breakdown across the different profiles assessed.

Starter

Starter
 Fee/Cost Average Fees Min Fees Max Fees
Annual Member Fee $89 $0.00 $480
Administration Fee $49 $0.00 $246
Investment Fee $118 $0.00 $480
Other Indirect Costs $60 $4.00 $215
Performance Fee $9 $0.00 $101
Source: Canstar
Fees are calculated based on an average super balance of $20,000 on funds assessed for Canstar Superannuation Star Ratings 2016.

Builder

Builder
Fee/Cost Average Fees Min Fees Max Fees
Annual Member Fee $81 $0 $480
Administration Fee $202 $0 $831
Investment Fee $473 $0 $1,926
Other Indirect Costs $241 $16 $863
Performance Fee $36 $0 $408
Source: Canstar
Fees are calculated based on an average super balance of $80,000 on funds assessed for Canstar Superannuation Star Ratings 2016.

Established

Established
 Fee/Cost Average Fees Min Fees Max Fees
Annual Member Fee $81. $0 $480
Administration Fee $352 $0 $1,455
Investment Fee $828 $0 $3,372
Other Indirect Costs $423 $28 $1,511
Performance Fee $64 $0 $714
Source: Canstar
Fees are calculated based on an average super balance of $140,000 on funds assessed for Canstar Superannuation Star Ratings 2016.

Pre-Retiree

Pre-Retiree
Average Fees Min Fees Max Fees
Annual Member Fee $81 $0 $480
Administration Fee $49 $0 $2,079
Investment Fee $1,183 $0 $4,818
Other Indirect Costs $604 $40 $2,159
Performance Fee $91 $0 $1,019
Source: Canstar
Fees are calculated based on an average super balance of $200,000 on funds assessed for Canstar Superannuation Star Ratings 2016.

Wealth Accumulator

Wealth Accumulator
Average Fees Min Fees Max Fees
Annual Member Fee $81 $0 $480
Administration Fee $1,095 $0 $5,199
Investment Fee $2,955 $0 $12,049
Other Indirect Costs $1,511 $100 $5,399
Performance Fee $228 $0 $2,550
Source: Canstar
Fees are calculated based on an average super balance of $500,000 on funds assessed for Canstar Superannuation Star Ratings 2016.

What will those superannuation fees mean for you?

Fees make an impact over the course of your working life, which you can see even before you retire.

As an example, we took a look at how the super balance of a 25-year-old might change if they paid fees of 0.75% or 1.50% a year. We calculated their balance based on an annual income of $45,000 and $70,000, assuming this increases by 4% a year. We based the calculations on 10% of salary being contributed into their super until they reach the age of 65, with a net investment return of 8% a year.

The difference is staggering. Someone earning $45,000 per year could potentially accumulate nearly $330,000 more in super if they had lower fees, while someone earning $70,000 per year could have over $450,000 more in super with lower fees.

Superannuation Fees: Case studies

Superannuation-case-studyPeter and Jane are average 25-year-olds in jobs that pay $50,000 annually. Both believe they will retire at 67 and have chosen a balanced investment option with their fund. For the purpose of this example, our superannuation calculator says the annual return on Peter and Jane’s super funds is consistently 9% before fees and tax.

Peter invests in ABC super fund, which charges a membership fee of $52 per annum and has a management expense ratio (MER) of 0.75%. Peter’s super balance at the time of retirement, based on our calculations, would be approximately $416,000 in today’s dollar terms.

Jane invests in XYZ super fund, which charges the same membership fee of $52 per annum but has a MER of 1.75%. This means her super balance at the time of retirement is approximately $333,000 in today’s dollar terms, based on the above assumptions

That’s $83,000 Jane potentially misses out on down the track simply because her fund charges a higher fee.

Here’s another example; we took a look at how the super balance of a 25-year-old might change if they paid fees of 0.75% or 1.50% a year. We calculated their balance based on an annual income of $45,000 and $70,000, assuming this increases by 4% a year. We based the calculations on 10% of salary being contributed into their super until they reach the age of 65, with an investment return of 8% a year.

Earning $45,000 per year Earning $70,000 per year
Beginning Salary $45,000 $45,000 $70,000 $70,000
Salary increase annually 4% 4% 4% 4%
SG rate (annual contributions) 10% 10% 10% 10%
Investment return in super each year 8% 8% 8% 8%
Annual fees (%) 0.75% 1.50% 0.75% 1.50%
Beginning super balance $25,000 $25,000 $25,000 $25,000
Super balance in 40 years, at age 65 $1,880,074 $1,551,237 $2,696,232 $2,240,590
Difference in super balance $328,837 $455,642

The difference is staggering. Someone earning $45,000 per year could potentially accumulate nearly $330,000 more in super if they had lower fees, while someone earning $70,000 per year could have over $450,000 more in super with lower fees.

Choosing a super fund that’s right for you really does matter in the long run, and it may be worth considering professional superannuation advice beforehand.

Learn more about Super

Similar Topics:

Share this article

Enjoyed reading this article?

Sign up to receive more news like this straight to your inbox

By subscribing you agree to the Canstar Privacy Policy.

Thanks for signing up!

Good things are coming your way.