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Retirees should watch annual fees cost
CANSTAR's annual research warns that the Australian retirees should watch the cost of their annual fees being charged by the funds of their choice.
The company has published the ratings for 64 account-based pension products from 58 providers with the aim of a study to determine whether the retirees are receiving the good value for money as the paid fees are typically a constant amount regardless of funds' performance.
Justine Davies, CANSTAR's editor-in-chief, said that the report proved that "account-based pension products showed a wide discrepancy in the annual fee being charged on a growth fund".
"Based on $400,000 account balance, annual fees ranged from a minimum of $2,000 up to just over $9,000. For retirees with a $750,000 account balance the annual fees ranged from $2,875 up to just over $16,970. While it may be possible that a fund's performance could outweigh the larger cost, investors should consider that it's easier to predict an annual fee than an annual return — and over a decade or so that discrepancy adds up to a very significant amount of money," she said.
|
Fees |
$100,000 Balance |
$400,000 Balance |
$750,000 Balance |
|
Minimum |
$550 |
$2,000 |
$2,875 |
|
Average |
$1,140 |
$4,131 |
$7,268 |
|
Maximum |
$2,457 |
$9,095 |
$16,974 |
|
Source: CANSTAR, 2016. Estimated annual fees based on products assessed for CANSTAR 2016 Star Ratings. Products represented an actively managed option with a 70% growth / 30% defensive asset allocation. |
|||
Additionally, according to CANSTAR's data, one-third of their clients interested in account-based pension products reported having $250,000 or less to invest and a further 40 per cent declared a balance of $500,000 and over.
When it comes to investment options, 27 per cent of clients were looking for Australian equities index fund option with another 21 per cent being interested in the shares fund option, followed by 19 per cent of clients that expressed an interest in both pre-mixed investment and international shares fund option and 14 per cent of the website's visitors looking for multiple options held.
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