Have retail funds learned anything from Royal Commission?

Industry superannuation funds are claiming their retail superannuation fund counterparts appear to have learned little from the Royal Commission in circumstances where some bank and insurance company-owned super funds are charging almost twice as much in fees.

The Australian Institute of Superannuation Trustees (AIST) pointed to research it commissioned from specialist ratings house SuperRatings comparing fees charged by retail superannuation funds to fees charged by profit-to-member industry funds.

It said the typical annual fee paid by someone with a $50,000 super balance in a High Growth investment option offered by a retail fund was $942 and that this compared to an average $591 in fees charged by a profit-to-member fund for the same product.

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The AIST said the difference was even more stark for those wanting to put their superannuation into more defensive investment products, such as people approaching retirement.

It said the SuperRatings research had found that a person with a balance of $250,000 in a mostly cash invested ‘Secure’ option in a retail fund would be paying on average $3,255 per annum, or 274 per cent more for the same product in a profit-to-member fund.

The AIST pointed to the fact that as account balances increased, the fees for the profit-to-member sector became even more competitive, given the lower overall asset-based fees charged.

Commenting on the outcome, AIST chief executive, Eva Scheerlinck said the report highlighted the need for regulators to provide tools that made it easy for members to compare fees and charges and make informed decisions about which super products were best for them.

“Currently, it is almost impossible for members of Choice funds to compare the fees and charges of their super fund. In the 21st century, this shouldn’t be that hard,” she said.

“Many members are paying almost double the fees for less returns on their retirement savings. It’s hard to see how the trustees of these funds can justify this in the post-Royal Commission environment.”

“People in low performing funds will be losing out on their superannuation and they won’t even know it. This is unacceptable.”

In terms of returns, the SuperRatings data showed that median profit-to-member MySuper funds delivered 6.47 per cent over the past three years to 31 December 2018, well above the 4.94 per cent achieved by the for-profit retail super funds.

The research noted the fact that historical comparisons between fees are harder now, given that the introduction of new fee and cost disclosure laws has changed the way funds disclose their fees.

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This does not take into account personal financial advice by the planner, fee discounts that the planner may provide, a much wider choice of funds and investments from which to choose and timely switches by the planner in volatile markets. Hardly chalk and cheese !

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