At the same time that the Federal Government is questioning the level of fees charged by industry superannuation funds, a survey conducted by Chant West has concluded industry fund fees are genuinely lower, although some need to keep their members better informed.
The Chant West data is based on a survey of 10 industry superannuation funds and involved asking members how easy it was to identify the different elements of the fees they were charged, to understand how those fees were applied and to quantify the financial effect on their account.
According to Chant West, while the quality of disclosure is mixed, the overall bottom line is that fees charged by industry super funds are genuinely lower than their retail counterparts.
“In the better cases, disclosure is complete and transparent, while in other cases, it is partial and opaque,” the Chant West survey says.
“In our opinion, some funds need to improve their disclosure to ensure that members can make an informed comparison of their fees with those of competing funds,” it says.
However, the survey says none of this should detract from the fact that industry funds’ fees are, in general, genuinely lower than those of their ‘for-profit’ competitors.
“Greater consistency in practice and clarity in disclosure will help dispel the myths and allow industry funds to promote their significant cost advantage,” the Chant West survey says.
Chant West principal, Warren Chant says the research was undertaken in light of frequent sniping about industry funds and hidden fees.
He says the research confirms there needs to be more transparency and better disclosure but also makes clear that the industry funds are not doing anything wrong.
The Chant West material says that each of the industry funds surveyed charges an administration fee in the order of $1 a week with one fund also charging an asset based fee of 0.1 per cent per annum.
It says that apart from activity-based fees, no other fees are charged to cover the funds’ administration and operating costs.
The research looked at the fees charged to members over a number of years (see table) and says some interesting issues were identified, including significant differences in the ratios from year to year, mainly due to fluctuating member protection costs.
“When the ratios are adjusted to remove the effect of member protection costs, they become much more consistent,” it says.
However, it says these variations are not obvious to members, whose fees only change infrequently, but are reflected instead in movements in the funds’ balance sheet reserves.
“Importantly, this is not an attempt to hide the true costs from members. Rather, it is an appropriate method of dealing with the unpredictable cost of member protection,” the Chant West material says
