There are so many super funds available to choose from. When you’re young, you probably don’t have time to spend hours comparing funds, we get that. However, if you think about super as extra money that’s yours, it makes sense to care about it and ensure your super is organised. The first step to getting your super organised is to choose a fund that’s right for you.
When looking for a super fund that works for you, it’s good to look at the funds average rate of return, the investment options they offer, and the funds fee structure. Superannuation account fees are taken directly out of your super balance, you won’t see them being deducted from your bank account like other services you pay for. Being with a super fund that charges high fees can lead to your super balance being eroded. With this in mind, what are the fees super funds charge and what’s a reasonable amount to be paying?
What types of fees can super funds charge?
Most funds will charge a number of different types of fees. Here’s a couple of common fees that super funds can charge:
The administration fee: pays for the cost of running the fund and maintaining your account.
An investment fee: charged for managing your investment - you could be paying different amounts depending on your investment strategy.
Insurance fee: the cost of covering you for insurance you have inside your super account.
The buy-sell spread: this is the difference between the buying and selling price of what you’re investing in and is generally inherent within any investments like superannuation.
As we said before, these fees will be paid from the money in your super account. Even though it might not seem like real money because you’re not paying out of your personal bank account, it is still important to consider the costs and their impact on compound interest. The money you contribute to your super while you’re young will compound for the longest time. Making it one of the most important investments for your future.
Student Super is helping young people grow their super balances and get their super organised early on. To protect early balances, Student Super offers zero fees for balances under $1,000 and discounted fees on balances from $1,000 - $5,000.
Australians collectively pay $32 billion in fees to their super funds every year. In 2018, super fund members paid on average 1.23% of their super balance in fees, which grew from 1.17% in 2017.
It’s a good idea to check for a full list of all fees that your fund charges. You can check out Student Super’s fees here.
You could be paying extra fees in addition to your super fees for insurance - and you might not even know that you’ve been automatically signed up for an insurance policy when you joined your fund.
Typically, the types of insurance you can get through super are: life insurance, total and permanent disability insurance, and income protection insurance. Like super fees and charges, the premiums are deducted from your super balance. It’s important to consider if you need insurance and if you have a super balance large enough to cover the cost of the premiums. If you aren’t regularly contributing to your super fund, insurance fees could be the reason your balance is being eroded.
As Student Super is a fund built specifically with students in mind, we don’t offer insurance. For people with low balances, insurance premiums can cause your account to erode faster. We’re working to protect your low super balance.
The government has now introduced legislation to address this problem. On 1 July 2019 legislation was introduced to cancel automatic insurance on inactive super accounts. This means that you won’t be charged or have insurance cover if your account has been inactive for 16 months. From 1 April 2020, super funds will no longer be able to offer automatic life insurance to members under 25.
Super fees and charges: key points to remember
Australians pay tens of billions of dollars in super fees to their funds each year. Without taking ownership of your superannuation, including choosing the right fund for you, you could see your super balance depleted by unnecessary fees, charges, and costs.
This is general information only and does not take account of your individual investment objectives, financial situation or needs. Before acting on it, consider if the information is appropriate and whether you need to speak to an accredited professional.
You should also consider the Product Disclosure Statement and Target Market Determination before making any decision. This product is issued by Diversa Trustees Limited (ABN 49 006 421 638; AFSL No. 235153; RSE Licence L0000635) as trustee for Student Super Professional Super which is a sub-fund of the Tidswell Master Superannuation Plan (ABN 34 300 938 877, RSE R1004953). Professional Superannuation Management Pty Ltd (ABN 31 617 160 791; AFSL No. 499786) is the Founder and Promoter of Student Super Professional Super which is marketed under two brands; Student Super and Professional Super.
Past performance is not indicative of future performance.