If you’re applying to join a super fund for the first time or thinking about switching funds, chances are you’re looking for a fund with low fees.
The amount and type of fees a superannuation fund charges can make an impact on your super balance over the long term. However, there are a number of other factors to consider aside from the fees to find a super fund that’s right for you.
What types of fees do super funds charge?
Super funds charge a range of fees for different purposes, usually on a monthly basis or if you take an action (such as switching funds). The most common types of superannuation fees include:
- Admin fees – General fees to cover the cost of managing and operating your super fund membership.
- Advice fees – Fees for financial advice given about your super and investments.
- Investment fees – Fees for investment management, which can differ depending on the fund and investment strategy.
- Switching & exit fees – Fees for changing your investment mix within the fund, or leaving the fund altogether.
- Transaction fees – Fees payable when you make a transaction such as contributing to the fund or withdrawing money.
- Insurance premiums – The cost of insurance coverage such as death cover, income protection cover and/or total and permanent disability cover.
Typically, these fees are deducted from your super balance any time you fulfil the criteria for being charged. In the case of admin fees, you’re usually charged each month you’re a member of the fund.
Do low-fee super funds equal better returns?
The short answer is that it depends. In some cases, choosing a fund with lower fees may be worthwhile because lower fees means more of your money can be reinvested and grow over time. For example, if your super balance is relatively low, you might choose a low-fee fund so that the fees don’t cut into your modest balance too significantly.
Over the long term, however, lower fees don’t necessarily mean better returns for you. Your returns are based on a number of factors, including how you choose to invest your money, your particular super fund’s performance and the performance of the market. So while high fees can eat into your overall balance and returns, they shouldn’t be the only deciding factor when choosing a super fund.
Other factors to consider when choosing a super fund
Selecting an appropriate super fund isn’t just about choosing the fund with the lowest fees. Here are some of the other key considerations:
- Performance – This refers to the returns a super fund has seen over a specified period, expressed as a percentage. Keep in mind that super is a long-term investment and returns fluctuate regularly – so it’s best to look at a fund’s overall returns over a longer-term period, minus fees and tax.
- Investment options – Most super funds offer different investment options ranging from stable (such as cash investment) to highly volatile (such as 100 per cent investment in shares and property). Make sure that the fund you choose has a suitable investment option for your needs.
- Extra benefits – Some employers pay more than the minimum contributions through certain funds. Consider whether you have access to an employer- or industry-specific fund where you can take advantage of these benefits.
- Insurance – Most funds offer some level of life insurance cover for a fee. Check what coverage is available and the cost.
- Customer service – Look for a fund that can offer support when you need it, and consider the fees charged for services like financial advice.
How to check your superannuation fees
Super funds are required to report the fees they charge in the fund’s product disclosure statement and on your annual statement. You can also access information about your fund, including your fees, by logging into your super account online.
It’s important to understand what you’re paying for when you pay super fees. If you’re not sure why a certain fee is charged, get in touch with your super fund for more information.
Where to find the lowest-fee superannuation funds in Australia
You can find out how your current super fund’s fees and costs shape up by doing a super fund comparison. Look at other fund’s fee structures and costs to weigh up whether the fees you’re paying are reasonable.
Remember that low fees aren’t the only yardstick for determining the best fund. It’s worth also considering long-term performance, investment options, benefits and insurance to get a clearer picture of whether a super fund is right for your circumstances.