Super Fees – So am I getting ripped off?
You know something is up when a clientemail appears on your phone early Saturday morning on a long weekend. Splashed across the front page of The Weekend West was the headline Bank Super Rip-Off. “Is what’s in the paper true? Am I getting ripped off ?”
It’s a fair and reasonable question and financial advisers all across Perth copped similar emails during the week. The team at Your Money also received a spate of super questions this week, some of which we are answering in the extended investment Q&A on this page.
Last week’s expose of superannuation funds by Your Money not only demonstrated how some people are getting a seriously lousy deal from their super, but also showed how difficult it is to unravel the statistical maelstrom that went into building the Australian Prudential Regulation Authority’s super comparison database.
The trouble is the APRA statistical data doesn’t reflect what happens to any one person in the real world. It is a statistical overview of fees, investments and performance that can disguise some serious winners and some real losers within one fund, often depending on where their adviser has placed their money. And you have to be very careful comparing any pairs when its comes to APRA data. According to APRA data, the Cbus industry super fund charged 0.15 per cent of assets under management in fees and Colonial First State Rollover and Super charged 1.97 per cent. If this were the truth for your investment, you would be getting your money out of Colonial faster than Donald Trump can tweet. It’s a very different story if you take the time to look beyond the APRA data and download the product disclosure statements for the Cbus and Colonial, and do your own comparisons. You’ll discover that for a growth-oriented Cbus super fund, you’ll be charged 1.17 per cent annual fees on a $50,000 fund and further fees may apply. Conversely, on $50,000 invested in the Colonial First Choice wholesale super fund in a similar growth option, and quite by chance, the fees are also 1.17 per cent. And some financial planners will rebate part of those fees, potentially making the Colonial fund cheaper than Cbus. Most good super funds should give you clear explanations of the fees in their product disclosure statements. The rough rule of fund is that total annual management fees for a fund should be from around 0.6 per cent to around 1.4 per cent. There is still a rump of old super products out there that charges fees of 2 per cent or more, often for services that can be obtained from the same company for much lower rates. Regardless of whether you believe the statistics, believe that it is worth having a good look around and seeing if you’re getting a good deal.