From 2000 to 2020, Australian super fund members forked out at least $362 billion in fees for the management of their super savings, according to research from consultancy firm Rainmaker.
Of this super fee bill, about $240 billion was collected for investment management, while the remaining approximate $120 billion was taken for fund administration costs.
When you open a super account, you will need to pay a range of different fees to your fund, including those for investment management and administration, which are deducted from your super balance. The amount you pay can vary greatly depending on your age, account balance, investment type and the super fund you are with.
Along with a fund’s long-term performance, fees can make a considerable difference to what you are left with in your super balance when you retire. For example, a Moneysmart case study suggests that a 30-year-old earning $50,000 per year (with an existing balance of $20,000) could have $81,000 more in super at age 65 by switching to a fund with total fees of 1% instead of 2.5%.
Because of this, when considering super funds, it is a good idea to take into account the fees that are charged along with the fund’s long-term performance, but also keep in mind the insurance and quality of advice that’s on offer can vary greatly between providers.
To help give you an idea of the fees that may be charged by various funds, the tables below display a snapshot of low-fee super funds on Canstar’s database for a range of different account balances:
For each account balance, the annual cost takes into account administration fees, investment fees and performance fees where applicable, and any other indirect costs, while the cost of insurance is not considered.
Please note that to ensure like-for-like comparison, only the default investment option from each super fund has been captured within Canstar’s database (where there is no default, the option with the highest ‘funds under management’ and a 60-80% growth asset allocation is used), so the fees of the funds listed in the tables below are not necessarily the cheapest on the market.
Investment options that have larger holdings of defensive assets (e.g. term deposits and bonds) typically have lower fees, although the long-term returns may be less than that of a fund with 60-80% in growth assets.
Low-fee super funds for $30k super balance
The table below shows some of the super funds on Canstar’s database for someone aged 18-29 with a super balance of $30,000 and are sorted by annual cost (lowest to highest). Use Canstar’s superannuation comparison selector to view a wider range of super funds.
To view the annual cost in fees of all super funds rated by Canstar, use our comparison tool:
The table below shows some of the super funds on Canstar’s database for someone aged 30-39 with a super balance of $80,000 and are sorted by annual cost (lowest to highest). Use Canstar’s superannuation comparison selector to view a wider range of super funds.
The table below shows some of the super funds on Canstar’s database for someone aged 40-49 with a super balance of $180,000 and are sorted by annual cost (lowest to highest). Use Canstar’s superannuation comparison selector to view a wider range of super funds.
The table below shows some of the super funds on Canstar’s database for someone aged 50-59 with a super balance of $500,000 and are sorted by annual cost (lowest to highest). Use Canstar’s superannuation comparison selector to view a wider range of super funds.
What fees are usually charged by a super fund?
There are a range of fees typically charged by superannuation funds:
- Administration fees
- Investment fees
- Performance fees
- Other indirect costs
- Insurance fees
Administration fees
Administration fees cover general fund operation and administration costs, such as the issuing of annual statements to fund members. These fees can be charged as a percentage of your overall balance, as a specified amount (which could vary depending on your balance), or as a combination of the two.
Investment fees
This fee covers the costs of managing your investments. It may vary based on your choice of investment and is usually charged as a percentage of your overall super balance.
The investment fee is typically subtracted from the investment returns before the returns are added to your account, so it’s likely you wouldn’t notice it if the fund didn’t point out how much the overall performance of the investments was reduced due to this fee.
Performance fees
A separate performance fee may be charged in addition to the investment fee if certain targets have been exceeded for the year. As with the investment fee, the performance fee is subtracted from the investment returns before the returns are added to your account.
Other indirect costs
As well as the fees outlined above, there are additional fees that may be charged to be aware of, including:
- Switching fees, if moving from one investment option to another.
- Advice fees, which may be charged when you obtain advice from your superannuation provider. This could be for a range of needs, such as choosing an appropriate investment option, deciding on a suitable level of insurance cover, or looking at what type of retirement lifestyle you can afford.
- Buy/sell spread fees, which may be charged by some super funds to pay for the transaction costs incurred when they buy and sell investment assets, such as shares or listed property (which happens every time you or your employer make a contribution to your super account or when you switch investment options).
Exit fees are now banned. This means super funds cannot change you a fee for moving all or part of your super balance to a different fund.
Insurance through super
In addition to fees, you may also be charged premium/s when you have insurance included within your super account. Most super funds automatically provide some members with life insurance – typically, life cover and total and permanent disability (TPD) insurance. Since 1 April 2020, this is now provided on an opt-in basis for most new members who are under 25 or have a balance below $6,000. The cost of insurance within super will typically depend on factors such as your level of cover, your age and your occupation. Premiums are automatically taken out of your super balance and you can opt out of this insurance if you want.
Be aware of more than just fees
Low fees are an important consideration, but they aren’t the only factor to think about. For example, you may want to consider fees in conjunction with a fund’s long-term performance, as the savings gained from low fees can be reduced or even outweighed by poor performance. That said it’s worth remembering that a fund’s past performance is not necessarily an indication of future performance. Other factors to think about include the advice and insurance offerings of the fund you are considering.
Our list of top performing super funds may help you get an idea of which funds on Canstar’s database have historically performed well. Or, you can compare the fees and features of various super funds on Canstar’s database.
Cover image source: Rawpixel.com (Shutterstock)
This article was reviewed by our Sub Editor Tom Letts and Senior Finance Journalist Shay Waraker before it was updated as part of our fact-checking process.