The range of fees, encompassing administration, investment, transaction, and performance fees, can further extend to include insurance and advice fees, particularly for those enrolled in tailored services.
The CT Group's research revealed that a prominent 74% of respondents recognize only the administration fee as the primary charge levied on their supers. Insurance fees are recognized by 40%, whereas 25% can distinguish investment and transaction fees. Surprisingly, the comprehensive understanding of all fee types is limited to only 1% of the surveyed population.
A significant 53% of participants confessed to being unaware of how these fees could potentially affect their account balances, and approximately 62% lacked the confidence to articulate the methodology behind these deductions.
Superannuation guidelines, such as the RG97, mandate uniform fee disclosure via product disclosure statements and MySuper dashboards. Nevertheless, as Daniel Shrimski, managing director at Vanguard Australia, notes, “It’s confusing, unclear, and impossible to compare,” referring to inconsistencies across platforms like websites and social media.
Vanguard's recent entry into the superannuation space in 2022 maintains its commitment to cost-efficiency, a hallmark of its index fund operations. The organization opts for an annualized fee representation incorporating investment, administration, and transaction costs collectively.
“We’re also keen to see the industry move towards communicating a transparent combined fee that members pay, rather than only citing one type of fee,” added Shrimski.
Conversely, Joshua Lowen from SuperRatings offers a different perspective. The real issue, he suggests, may not solely be transparency but the inherent complexity of the fee structure. As Lowen explains, “Every member pays for fees, you can’t get away from them, but they do very different things.” He highlights that these fees serve distinct roles: administration fees support member services, investment fees fund asset management, and transaction costs arise from managing investments.
Additionally, Lowen cautions against oversimplifying the super fund fee conversation. “It’s simple to say ‘let’s do a single fee’…but members then need to understand, just because you’re in a higher cost product – if you’re investing in a way that gives you higher returns – then that may not be a bad thing,” he explained.
He sees an educational gap that needs addressing so members can assess if they are genuinely comparing like-to-like fund offerings, “Like-for-like, lower fees are better, but members need to be able to work out if they are actually comparing like-for-like as well. That’s where you’re going back to that idea of complexity.”
Another hurdle to fair comparisons, according to Lowen, is incomplete industry-wide data hosted on super fund websites, making it a challenge for average consumers to gauge fee competitiveness: “They could be comparing two expensive products, choose the cheaper one of the two, and not realize that they’re actually both expensive.”
Finally, Lowen stresses the necessity for members to empower themselves by actively utilizing resources such as the Australian Taxation Office’s YourSuper comparison tool, “Members need to take the responsibility of regularly or semi-regularly examining if their fees are in line with what they expect.” He encourages individuals to ensure they’re assessing truly comparable investment strategies and fee structures.
