News National Super fees ‘hurting retirement’

Super fees ‘hurting retirement’

Twitter Facebook Reddit Pinterest Email

Australians with superannuation accounts are paying three times more in fees – about $1100 a year – than other comparable countries.

Over time those fees reduce account balances at retirement by more than 15 per cent.

Read the full report: Super Sting (PDF)

Research by the Grattan Institute finds Australians pay about $20 billion in fees each year.

That’s three times more than the median paid by OECD economies where superannuation pools are much smaller.

The analysis is timely as a debate rages over the need to lift the retirement age amid rising costs to the federal budget.

The report’s author, economist Jim Minifie, says there is an argument that the complexity of Australia’s superannuation regulations increases the cost of the system.

“If this is true, it reveals the urgent need to reduce regulation,” he says in the report released on Sunday.

Front cover of the Grattan Institute report.

However, the wide variation in fees charged by funds suggests super businesses are choosing to charge higher imposts.

Dr Minifie also believes recent reforms will not help much.

MySuper – a more uniform set of products for people who do not actively choose their funds – makes funds easier to compare, but does little to relieve the pressure of fees.

Dr Minifie says fees should be at least halved.

He believes the cost could be substantially reduced if the government selected a small number of default funds every few years with a tender based on fees.

All new job starters would pay into these funds, unless they opt out and choose their own.

To push down fees for existing accounts, tax time at the end of June should also be superannuation choice time.

A new step in the tax return process should encourage taxpayers to compare their current fund with the low-cost winners of the default tender.

Dr Minifie concedes these measures may reduce the revenues of super funds.

“More importantly, they will reduce the sting of high fees,” he said.