High Superannuation Fees

[qwerty8675309]

I've been reviewing the fees for my superannuation fund, and they seem excessively high (for others around the world, a superannuation fund is similar to a 401k). My fund charges around 1% fees per year. On a $50k balance, this is costing me $500 a year. Excuse my colloqualism, but that's a bloody rip off! Compare this to $50k invested in a low cost index fund (eg, VAS has a fee of 0.15%), I'm only paying $75 a year for it.

Has anybody else been frustrated by how high the fees are for superannuation funds? Has anybody found ways to minimise these fees? I've thought about an SMSF, but the amount I have in super doesn't justify the cost. I've also had a look at member direct options, which allow you to directly invest superannuation funds into shares and ETFs, but they usually slug you with an additional fee for this option, and force you to invest 20% of your total super in one of their expensive funds.

[potm]

Australian super and sunsuper have cheaper index options. Google superanuationfreak blog for a comprehensive analysis.

[qwerty8675309]

Thanks for the tip potm! I've found an interesting super fund - HostPlus Indexed balanced. It has a 0.04% management fee per year. It's incredibly low - it makes me wonder if there's a catch:

http://memberguide.hostplus.com.au/6-fees-and-costs

There doesn't seem to be any buy/sell spreads, switching fees or exit fees. I might do a bit more reading to see if there's some 'catch' to it all.

The HostPlus Indexed balanced fund has only 75% of its holdings in equities, and the other 25% in cash or bonds, which isn't ideal for an accumulator, but when factoring in the fees from other more expensive funds, it still works out better.

[LLTF1836]

Glad you were able to find a better option (relatively). In the US we don't have nearly as much control of our 401k. There are a lot of people in the US who would be thrilled to have a 1% per year option.

[marty998]

Who are you with querty? One of the big bank retail funds (MLC, BT, Colonial, AMP)?

Damn those dastardly unions and their lost-cost high-return funds! How is a banker or financial planner supposed to earn a living these days!

[Murdoch]

Qwerty,
Superannuationfreaks blod definitiely has some good stuff.

I am with QSuper which is the QLD Gov forced option. I imagine (but haven't checked), that other government Super Funds are similar, and it offers a pretty good range of options, with some low cost funds thrown in, and the option to diversify and mix into whichever funds at whatever mix you desire.
You can only access it by having a QLD Gov job. However, once you have an account, you can use all future jobs to pay into it even if you no longer work there.
Have a look at these super organisations in your area, and I'd recommend considering getting any casual gig that qualifies you for entry, even for a month. Then once you have the account, quit.
Not for everyone, but a hack that may suit your situation?

Murdoch

[urbanista]

ING Living Super has a DIY option. For an admin fee $180 per year, one can buy shares and EFT directly from ASX. One has to pay brokerage $20 per trade though, which is the same as for investing outside of super. But at least brokerage is a one-off cost. Can be a problem if you want to invest often. Then there are Vanguard management fees that vary for each EFT.

I am with Australian Super, their 100% Australian Shares option charges 0.30% investment fee, plus $75 pa admin fee, plus there is some spread which I don't care since I don't sell.

[HowMuchCanAKoalaBear]

For SMSF its recommended you have at least a 300k  balance the fund has to be audited by an accountant each year fees can be around $2,000+

The guy above qwerty  looking at Hostplus its 0.86% for the balanced option.

Definitely stick to industry funds I saw a report after 15 years they have beaten all the  high fee retail  funds.

I use First state super anyone can join. Just got my 6 month statement balanced option works out to 0.54% for the year.


http://www.superguide.com.au/how-super-works/super-funds-deliver-7-2-over-7-months-and-2-for-january-2015

regards Koala

[happy]

As well as the fees, check out the returns on similar products. One way to "hide" fees, is to post a lower return.
Industry super funds are usually  recommended as the best.

[qwerty8675309]

Thanks for all the replies! I'm currently with EquipSuper. They are an industry super fund, but they still charge an arm and a leg in fees (just over 1% p.a).

I've had a think about using a member direct option, but there are additional costs associated with it (additional admin fees, brokerage costs, payment for capital gains, etc). Most of the super funds that offer member direct options also force you to invest a certain amount in their more expensive funds. eg, AustralianSuper forces you to invest 20% of your funds in one of their expensive funds, presumably to recoup some of the cost.

In terms of an SMSF - my current super balance doesn't justify the cost of running one. It might be an option for me down the road though as my balance grows.

I've had a closer look at some of the SunSuper options. They have quite a few index funds that you can mix and match to your liking. Doing some quick calculations to work out the cost to hold $50k for a year in an example mix of half ASX200 and half MSCI world ex AU indexes:

Admin cost: $65
Fee for 50% invested in ASX200 index @ 0.2% p.a: $50
Fee for 50% invested in MSCI World ex AU index @ 0.3% p.a: $75
Total cost (Ex insurance, TPD, etc): $190 per year, or 0.38% p.a

There's also a small buy/sell spread of between 0.25-0.3%, but this is small enough to ignore if I don't switch funds often.

Doing a similar calculation for HostPlus Indexed Balance fund, it works out to be a bit cheaper, but 10% of their allocation is in cash (which is terrible), and another 15% is in bonds (not so bad):

Admin cost: $78
Fee for 100% in Indexed Balance @ 0.14% p.a: $70
Total cost (Ex insurance, TPD, etc): $148 per year, or 0.296% p.a

The good thing about HostPlus is that they don't have buy/sell spreads, so if they jack up their prices, I'm outta there.

So I'm still not 100% sure if I'll go with SunSuper, or HostPlus, but at 0.38% and 0.296% p.a, I don't think I can go wrong either way.