Superannuation fees

Super fees are a pesky reality of growing your retirement savings, but with a bit of know-how, you can keep them from nibbling away at your future wealth. This guide helps you navigate through these superannuation fees, shedding light on how to cut down on them effectively. 

Making sense of your super fees

Understanding your super fees is key to maximising your retirement savings. Generally, in MySuper funds or pre-mixed investment options, you'll encounter three main types of fees: administration, investment, and transaction fees.

Administration fees

These fees are for the admin side of things like providing customer support, managing contributions and sending you statements. For instance, the Australian Retirement Trust charges a flat rate of $1.20 weekly plus 0.07% of your balance annually, with an added 0.10% for balances up to $800,000. On a $50,000 balance, you'd pay $147.40 annually in administration fees.

Investment fees and costs

Investment fees vary depending on your chosen investment option, reflecting the management's effort, expertise, and the cost and complexity of investing in the types of investments that it covers. Using Australian Retirement Trust's Lifecycle Investment Strategy Balanced Pool as an example, the fee is 0.59% annually. For a $50,000 balance, this equals $295.

Transaction costs 

Transaction costs, associated with the buying and selling of investments, also vary by strategy due to differing trading frequencies. Australian Retirement Trust's transaction costs for the same investment option amount to 0.21% annually, totaling $105 on a $50,000 balance.

Total annual fees calculation

Adding up the fees for a $50,000 balance in Australian Retirement Trust:

• Administration: $147.40
• Investment: $295
• Transaction: $105

Total annual fees would be $547.40, translating to approximately 1.09% of the $50,000 balance.

Other possible superannuation fees

Once you've got a handle on the usual fees associated with MySuper or similar pre-mixed investment options, it's time to look a bit further.

The fees we discussed earlier are what you'd typically expect as your super account ticks along, growing your retirement savings. But, depending on certain choices you make or specific features of your fund, you might come across some additional fees.

Not everyone will face these fees, and they won't affect every account in the same way. But knowing about them means you're better equipped to make decisions that suit your super strategy.

Let's explore some of these potential fees:

• Switching fees. Incurred when you change investment options within your fund, covering the administrative costs of making these changes.
• Establishment fee. A one-time charge for setting up your super account, not commonly applied across all funds.
• Indirect costs ratio (ICR). Reflects additional investment expenses not directly charged to your account but impacting overall returns, such as fees paid to external managers.
• Contribution fees. Less common in modern funds, these are charged by some funds for each contribution made, aimed at covering processing costs.
• Exit fees. Though becoming rare, some funds charge a fee for withdrawing your money or transferring to another fund.
• Advisory fees. Charged for personalised investment advice, which can be a flat rate or a percentage of your investment.
• Active management fees. These fees cover expenses such as transaction costs, maintenance fees and brokerage fees associated with the actions of buying, selling, switching investments, maintaining real assets, and executing stock trades. They're particularly relevant in options like self-managed super funds (SMSFs) and member direct options, which allow for the active management of investments.
• Insurance premium costs. Most funds offer life, total and permanent disability (TPD) and income protection insurance as a convenient way to protect yourself against unexpected events without out-of-pocket expenses. If you choose to purchase this insurance through your super, it will come out of your contributions.

Knowing these fees lets you manage your super more effectively, helping you reach your retirement goals without unnecessary costs.

How to find out what superannuation fees you’re paying

You shouldn't be left in the dark about what fees you are paying. Your fund is required by law to transparently disclose all fees and charges, and there are numerous ways you can find this information.Here’s how:

• Check your statements. Keep an eye on your superannuation statements. They often break down the fees you're being charged.
• Break out your PDS. Take a closer look at your superannuation fund's Product Disclosure Statement (PDS). This important financial document outlines all the fees and charges.
• Check online. Many super funds have online portals where you can access detailed information about your account, including fee structures.
• Reach out directly. Can't find what you need? Don't hesitate to contact your superannuation provider. They're there to help and can give you a clear breakdown of your fees.
• Consider expert advice. If you're still unsure or want more personalised guidance, consulting a financial advisor can provide valuable insights into your superannuation fees and how they impact your retirement savings.

How to reduce you super fees

Looking to lower your super fees? Here are some tips:

• Shop around for super funds. It's smart to occasionally see how your super's fees measure up against others. Smaller fees can lead to bigger savings for your retirement stash. The ATO's YourSuper comparison tool is a solid starting point. Just be sure the new fund aligns with your investment goals and the kind of help you need.
• Bring your super under one roof. Got super scattered across various accounts? Each one likely comes with its own set of fees. Pulling them all into a single account not only cuts down on costs but also simplifies managing your retirement savings.
• Look into indexed funds. These funds are a nifty choice for anyone looking to minimise fees. They mirror the moves of a market index (think S&P/ASX 200) and keep costs lower since they're not actively managed. Remember, though, your returns will swing with the market’s ups and downs. Dive into your super’s options or seek out funds known for their selection of indexed investments.
• Reassess your insurance. It’s common for super accounts to include insurance coverage—like for life, TPD, or income protection. Give your coverage a regular checkup to ensure it still fits your life’s blueprint, as you don't want to erode your super with premiums for coverage you no longer need.
• Monitor your investment choices. Some investment routes, particularly those that give you the reins to manage your investments directly, might tag on extra fees such as brokerage or maintenance charges.

While keeping fees in check is important, don’t lose sight of the bigger picture like how well the fund performs, the level of risk you’re comfortable with, and the extra services on offer. It’s all about informed decisions.

Are superannuation fees the same as superannuation taxes?

No. Super fees and taxes play different roles in your super. Fees are what your super fund charges for managing your money, like the costs for making investments, running the fund and providing insurance. Superannuation taxes are set by the government and applied to things like the portion of your salary contributed to your fund, and the fund's earnings. 

To learn more about super taxes, super contributions and other aspects of super, check out our superannuation guides hub.