Superannuation Fees

“Am I paying an acceptable level of fees on my super?”

This a very common question received by the financial planners in our practice. And the answer is dependent on your own personal situation.

All superannuation funds charge fees, but these can vary significantly from fund to fund.

There are a few key super fee types:

Types of Superannuation Fees

There are a few key super fee types:

Superannuation Administration Fees

This is a flat fee charged by a super fund to administer your fund. The fee covers the basic cost of overseeing the fund – including maintenance of the software that allows you to access your fund details online, emails and printed communications about your fund.

Investment Fees

Sometimes referred to as a management fee, this is generally a percentage-based fee. The fee is deducted from the assets of the particular investment options your super is invested in. As a general rule the higher the risk profile of the specific fund you’re in, the higher the fee.

Exit Fees

This is a fee that may apply to your fund if you withdraw your monies and direct them to another fund. It is generally deducted directly from your account when you make a full (or sometimes partial) withdrawal from your account.

Adviser Fees

Adviser fees cover financial advice provided to you by your financial adviser. The fee is agreed on upfront before any fees are deducted. Before deciding whether the fee sounds fair, ask yourself some key questions:

  1. How frequently do you wish to be contacted by your financial planner?
  2. How much time do you wish to spend with your financial planner on an annual basis?
  3. How complex is your portfolio – do you have direct shares or a managed fund?

Other fees charged can include:

  • Indirect costs paid by your fund to external providers such as investment managers
  • Switching fees when you change your investment option within the fund
  • Buy/sell spread which can be charged every time you make a transaction, including making a voluntary contribution to your fund
  • Insurance premiums provided through your super fund
  • Activity-based fees that may apply if your super fund provides you with a specific service. For example, splitting your super following a relationship separation.

The fees and charges can be a dollar amount or a percentage and are generally deducted directly from your account. The table below shows the potential effect of fees on your superannuation retirement balance.

Example: The Difference 0.5% in Fees Could Make on End Superannuation Balance

Age25 years old25 years old
Income$50,000 indexed at 2.5%$50,000 indexed at 2.5%
Superannuation Earnings7% per annum7% per annum
Annual Fees1% of balance1.5% of balance
Account Balance at 65$1,094,743$976,583

Source: Canstar

 

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