Australians depend on their superannuation funds to help them ensure a secure retirement. But new research suggests Australians could be losing out precious savings due to hidden fees.
Last year, the Australian Securities and Investment Commission (ASIC) reviewed fee disclosure practices in the superannuation industry, and the results weren't pretty.
"It is crucial for super and managed fund issuers to disclose fees and costs on a consistent and comparable basis in order for consumers to make meaningful comparisons between products," said Greg Tanzer, ASIC Commissioner at the time.
"Our review shows that there is some inconsistency at the moment and we will work with industry to improve fee and cost disclosure more generally."
It seems that, along with regular costs and expenses, Australians' retirement savings are increasingly facing a challenge from their own superannuation accounts.
Investors handicapped by inconsistent disclosures
The ASIC's report, titled Fee and Cost Disclosure: Superannuation and Managed Investment Products and released in July 2014, highlighted a number of cases where disclosure of fees and costs was inconsistent with existing super guidelines. One such example surrounds the reporting of performance fees.
It's typical for an issuer to pay a performance fee to their investment manager when the performance of a super fund outdoes its pre-agreed target. However, as the report notes, in some cases these fees are estimated based on the expected level of fees in a given year, while in other cases performance fees are not being disclosed as a separate charge, because they are taken out of a trustee's fees to pay the manager.
Also highlighted by the report was the issue of fees net of tax being incorrectly disclosed, as well as fees relating to underlying investment vehicles not being disclosed at all.
Dealing with super fees
Superannuation accounts come with a variety of different fees. Some of the more typical fees include member fees, which are charged in order for you to keep your super account, contribution fees, which are deducted from each of your contributions to cover the expense of investing them, and investment management fees.
You can also be charged exit fees, for when you leave a plan or withdraw money, and switching fees, for when you swap out of an investment option.
With fee transparency still requiring improvement, it's not easy for investors to factor in fees into their superannuation calculator, or to detect what kind of fees they are being charged. One way around this is to read a fund's annual report and member statement – if they're relatively vague and lacking in detail, it could be a warning sign.