As Australians focus on maximizing their superannuation returns, recent research from Rainmaker brings encouraging news: self-managed superannuation funds (SMSFs) maintain their status as the most cost-effective segment in the super sector.
The study, part of Rainmaker Information’s Superannuation Benchmarking Report, explores the evolving dynamics of superannuation fees and their impact on consumers.
Understanding the Numbers: A Deeper Dive into Super Fees
The comprehensive analysis, covering 1,500 super fund fee options across 354 products, revealed that overall super fees have reached a historic low of 0.93% per annum. Notably, SMSFs continue to set the benchmark with average fees of just 0.65% per annum, underscoring their affordability in comparison to other segments.
As of June 2023, MySuper, the most competitive sector, experienced a notable reduction in average fees from 1.05% to one per cent per annum. Pooja Antil, Research Manager at Rainmaker Information, highlighted that this represents the most significant drop in MySuper benchmark fees since 2014. The study also found that within MySuper, fees are now on par for retail and not-for-profit funds.
Unveiling the Dynamics: NFP Funds, Retail Products, and Fee Variances
Delving deeper into the MySuper landscape, not-for-profit (NFP) funds stand out for offering lower administration fees, while retail products exhibit lower average investment fees. However, personal and retirement products still lag in terms of fees, charging 1.16% per annum and 1.07% per annum, respectively.
Despite the positive trend of a decreased total expense ratio for fees, the overall fees paid to superannuation funds increased by 3%, reaching a substantial $32 billion. This intriguing trend indicates that total fees are growing at twice the rate of funds under management (FUM).
A Call for Consumer Empowerment: Encouraging a Competitive Superannuation Market
As super funds manage approximately $3.5 trillion for Australian fund members, the sector has witnessed a growth in FUM from $3.3 trillion to $3.5 trillion over the past year. However, the discrepancy between fee revenue growth (3%) and super FUM growth (1.5%) raises questions about potential diseconomies of scale, which might attract regulatory attention in the future.
Pooja Antil emphasizes the importance of encouraging a healthy and competitive superannuation market that exerts downward pressure on fees. This continual push for affordability benefits consumers and aligns with the broader goal of fostering a transparent and consumer-centric superannuation landscape.
For personalized insights and guidance on navigating the evolving superannuation landscape, contact Boa & Co at 1300 952 286 or via email at info@boanco.com.au. Visit us at Level 2, 7 Railway Street, North Tower, NSW 2067, Sydney, NSW, Australia 2067, or explore www.boanco.com.au.