Average superannuation fees: Here's what super funds charge

All superannuation funds charge fees. What you may not realise is that there are a number of different fees depending on the type of fund you have, your balance, and the activity on your account.

Australians may have incurred losses to their retirement savings during the global coronavirus pandemic. Unless you have a self-managed super fund, your options to recoup these finances may be limited. Seeking out lower fees may be one way to improve your superannuation balance.

You may want to consider super funds with next-to-no fees but keep in mind that a fund with higher fees might return greater value over time than those with lower servicing charges.

Most fees are deducted from your returns before they’re credited to your account.

The federal government’s Productivity Commission handed down a report in early 2019 assessing the efficiency and competitiveness of Australian superannuation funds. There was evidence to suggest that “excessive and unwarranted fees” existed in the super system.

“Fees are not only the biggest drain on long-term net returns across funds, but are also a much more predictable indicator of a fund’s investment performance (ex ante) than gross returns,” according to the report.

The report found that funds charging higher fees typically do not deliver better net returns over time.

“Even small differences in fees can significantly impact retirement incomes. Higher fees of just 0.5 percent can cost a typical full time worker about 12 percent of their balance (or $100,000) by the time they retire,” the report stated.

This is why it is important to understand what fees you might be paying and how much these may equate to.

How much, on average, do Australians pay in super fees?

RateCity has crunched the numbers to reveal the minimum, maximum and average fees paid by Australians across different age groups, according to their superannuation balance.

The graph below shows the total fees charged as an annualised figure.

Source: RateCity data, accurate as of 8 September 2022.

A 25 year-old with a balance of $14,400 can expect to pay an average $242.26 per year in super fees, while a 35 year-old holding $76,110 may be charged an average $855.30 each year.

The lowest amount of fees a 45 year-old with a super balance of $166,230 can expect to pay is $493.57, while the maximum costs can exceed 10 times that amount.

Individuals just shy of retirement age, at 65 years-old, possessing a super balance of $490,020 can pay as little as $1,303.05 in annual fees but typically pay an average $4,967.08, which equates to approximately 1% of their balance.

On average, fees for super fund members across all age groups range from 1-1.7% of their total balance.

The data also showed that Australians in age groups 35 and over, paying the maximum amount in fees each year, would only sacrifice 3.2% of their total balance. In contrast, young Australians aged 25, and possessing a significantly lower super stash, were giving up more than 8.7% of their balance if paying the maximum amount in fees.

What are the fees you are likely to pay?

Some of the fees charged by superannuation funds include:

• Administration fees: These cover the costs of managing your account. They also contribute to fund maintenance and ancillary services, such as call centres and mobile apps. Fees may be a fixed charge or a percentage of your account balance, or a combination of both. Funds must annually cap admin and investment fees at 3 per cent if your balance is below $6,000.
• Investment fees: These cover transaction costs and the team managing your fund. The investment fee is typically charged as a percentage of your super balance.
• Buy/sell spread fees: When you contribute to or withdraw from your super fund, fees may be charged to cover these transaction costs.
• Switching fees: Over the years, you may choose to switch the type of fund you hold. For example, moving from a balanced investment option to a more aggressive approach may incur a fee.
• Financial adviser fee: Most super funds offer general financial advice at no charge. However, should you request more comprehensive, personal advice you may be charged a fee.
• Insurance premium: If your fund includes insurance how much you pay will likely depend on the cover you have, your age and your occupation.

Australian workers are expected to make regular contributions to their super throughout their working life to help fund their retirement. For many, the process is taken care of by employers through the super guarantee (SG).

In addition to SG contributions, Australians also have the option to make voluntary contributions to their super fund. If you’re considering doing so, you may be wondering how you’ll be taxed on these additional savings.

In 2021, the SG was legislated to increase to 12 per cent by 2025, with the first of a string of annual 0.5 per cent hikes occurring last July. The rise in July this year took SG contributions to 10.5%.

Consider making a habit out of checking your super fund to ensure payments are being made correctly and assess whether your investment options remain reflective of your preferences and where you’re at in your career.

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