Superannuation fees dropping across the board

Richard Gilbert

Consumers are getting a better deal right across the superannuation sector, with fees for virtually every type of fund having been reduced over the past 24 months, according to research released by the Investment and Financial Services Association (IFSA).

The IFSA research, undertaken by Rice Warner Actuaries, has prompted IFSA chief executive Richard Gilbert to suggest that consumers have been well-served by choice of superannuation fund because it generated increased competition and increased funds under management, which had, in turn, placed downward pressure on fees.

He pointed to the fact that the largest reductions in fees had occurred in large corporate super master trusts, retail post retirement, personal superannuation and small funds.

Gilbert said, overall, fees for the whole superannuation industry, expressed as a percentage of assets, averaged 1.26 per for the year to June, 2006, down from 1.30 per cent in June, 2004.

The Rice Warner data placed the expense ratio for industry funds at 1.13 per cent, and the actuarial firm acknowledged this is somewhat higher than that suggested by the Australian Prudential Regulation Authority.

“We estimate that total incurred expenses were $1,718 million, which may be expressed as 1.13 per cent of assets over the year,” the Rice Warner analysis said. “This is considerably higher than APRA’s estimate of the investment and operating expenses of industry funds over the period, which may be expressed as 0.76 per cent of assets on the same basis. However, our analysis includes an estimate of investment management expenses deducted from fund earnings in addition to the explicit investment costs reported in the accounts.”