Rich's investigation into various industry super funds revealed a stark contrast in fees between default MySuper options and alternative index fund options available on the same platforms. By comparing these options with similar risk profiles and asset allocations, he discovered fee discrepancies that could reach up to $3,000.
For instance, the default Cbus fund charged fees of $2,152, whereas its comparable index fund carried fees of $952. Similarly, AustralianSuper's default fees stood at $2,062, compared to $592 for the index fund. Aware Super and Hostplus default funds also mirrored this pattern, with significant savings available to members opting for index fund alternatives.
The long-term financial implications for super fund members are substantial, as these fee disparities accrue over decades. Rich emphasises that due to the compounding nature of these costs, opting for lower-fee options can significantly enhance members’ retirement savings.
He noted that, the difference in fees could mean better financial security in retirement, translating into more lifestyle choices for families: As balances grow, these percentage-based fees lead to larger dollar differences, highlighting the importance of scrutinising super fund options.
Rich argues that super funds often lack transparency regarding fee structures, a feature MySuper was initially supposed to address. The complexity of identifying these investment fees unintentionally disadvantages members who do not actively investigate their super fund details.
Rich urges both financial advisers and super fund members to look beyond the default options. Advisers are encouraged to help clients by starting with an open mind and delving deeper into the numerous investment options super funds offer, and that Advisers should become familiar with the full gamut of investment menu options. This approach can prevent unnecessary costs and ensure that financial advice is tailored to individual client needs.
As financial literacy rises, members and advisers alike are likely to demand greater transparency from super funds. Rich's initiative aims to enlighten Australians, making financial decisions more informed and empowering them to take control of their retirement futures.
