Total superannuation fees are growing faster than superannuation assets, up 10% in the last year, Rainmaker Information has found.
Total super fees were $32 billion, up from $29.1 billion in the previous year, says the firm. The average super fund member is paying 1.23% in fees in 2018, compared to 1.17% in 2017.
ASIC fee disclosure rules hit not-for-profit funds
The firm said the annual increase in headline fees was “largely attributable” to ASIC changing how fees are disclosed, under the RG97 framework.
“This cost disclosure reform has however been in large part discredited in a report subsequently issued by ASIC in July that acknowledged it unfairly penalised not for profit (NFP) funds,” said SelectingSuper, part of Rainmaker.
Of the estimated $2.2 billion increase in reported fees, $2 billion impacted not-for-profit funds.
Alex Dunnin, Rainmaker’s Executive Director for Research & Compliance, said the disclosure change make it more important for members to understand the fees they are paying.
“These changes have dramatically changed the comparative sticker price fees across the market with retail funds offering many of the lowest price MySuper products available,” Dunnin said.
He said that it is useful for consumers to look at the administration and investment fees separately, not just the headline fee.
“Products offered by not for profit funds still have administration and member fees that are on average 50% cheaper than retail funds, but the fees for investment offsets this advantage.”
“However investment fees vary according to what investment option the member takes up. Many funds offer low cost index options as well as higher cost more active diversified options. Ultimately fees, particularly investment fees should be seen in light of net investment returns and risk.”
The top five funds on the Rainmaker ‘MySuper Products – Best 10 by lowest Fees’ list are either retail or corporate funds. The highest public-offer industry fund is ranked number 7.
“Despite what some super fund members may think, superannuation is now a highly competitive marketplace. If members do even a little shopping around they might be surprised how much money they can save doing something as simple as swapping their super funds,” said Dunnin.
The 2018 Rainmaker Fee Study analysed over 2,500 fee options across 550 superannuation products.