Fees not a definitive measure on super

Fees are not necessarily an appropriate measure by which to judge superannuation funds, according to specialist superannuation research and ratings house, SuperRatings.

In an analysis published this week, SuperRatings chief executive, Adam Gee said that fees were, at best, only loosely correlated with value and that any assessment of a superannuation fund should be made using a broad range of criteria.

Hardly surprisingly, he then cited SuperRatings preferred measure — ‘net benefit’ entailing investment returns less all implicit fees and taxes as being the only meaningful basis for comparison of fees and investment performance.

“Of course, when measuring overall value, consideration must also be given to broader issues including member services, administration capabilities, governance and insurance offerings, all of which can affect retirement outcomes,” Gee said.

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He said that SuperRatings had recently completed a review of all major superannuation funds that had a 10 year performance history and that for each of the 162 funds, a net benefit calculation had been applied, leading to some surprising results.

“In the majority of cases, the funds with the lowest fees do not necessarily provide a better retirement outcome or return for its members,” Gee said.

He said that during the ten year assessment period, fees had at times almost had an inverse relationship to retirement outcomes, reinforcing the analysis that lower fees do not necessarily mean a higher fund balance.

“Our analysis suggests there can clearly be an inverse relationship between fees and outcomes for members,” Gee said.

“This certainly supports our view that a tender process based purely on fees will not improve the retirement outcomes for most people.”