AustralianSuper is Australia’s largest super fund, with $120+ billion and 2.2 million Super members.
But despite being the largest Super fund in Australia it plans to raise its fees in 2019.
AustralianSuper’s 2019 Fee Increases
In an update on the Super Fund’s website, AustralianSuper says that from 30 March 2019 the ‘non profit’ organisation will raise its standard administration fee from $1.50 to $2.25 per week, which is $39 per year or 50% more. I originally thought this was for its Choice Income and TTR Income members only. However, I now know it applies to everyone.
You might be saying to yourself, “ah well, what’s an extra $0.75 per week between friends, eh?”
$1.50 per week x 52 weeks x 2.2 million members = ~$171 million in admin fees.
$2.25 per week x 52 weeks x 2.2 million members = ~$257.4 million in admin fees.
In other words, about $50m+ per year extra in the hands of the Super fund.
Obviously, those are just round figures, I don’t know if all of the members pay the same fees.
But here’s the first thing: this isn’t the only fee AustralianSuper members pay. Our Rask Finance website has a great educational tutorial for understanding how Super fees work.
Typically, the admin fee is the lowest fee most people would pay for Super. Sometimes there are investment fees, then you’ll have indirect costs, buy/sell spreads… the list goes on…
Here’s the second thing about Super: it doesn’t take much more money, staff or technology to have 1 million members or 2.2 million members. Meaning, if 1 extra member joins a super fund the costs don’t really change much, yet the Super fund can charge the same fees.
Meaning, it should be making more money. So much for being part of a big Super fund!
Why Is AustralianSuper Raising Fees?
Good question. I asked, and it seems they will be using the money for general upgrades.
The Super fund says the money will be directed to:
- “Upgrading digital technology & improving cybersecurity” (cheap shot: Isn’t all technology digital nowadays?)
- “Developing new products & services” (what new products? I was quite happy with the current product)
- “Briefings, seminars and online tools”
I spoke to the team whose job it is to field the new fee types of questions and they pointed out that their admin fees hadn’t gone up in 10 years, yet their expenses have. That’s well and good, but since 2006 it has grown from 1.1 million members to over 2.2 million members. That’s a lot more fee-paying members!
In 2018, AustralianSuper said it saved the equivalent of $100m+ by internalising investment management (i.e. bringing the investors in-house instead of paying outsiders to do it). Apparently, this has led to a reduction in investment fees for members. So pay credit where it’s due.
Seeing my Super fees increase rubs me the wrong way – things should be getting cheaper not more expensive. And if they are upgrading their systems, I would like to think they could fund it from internal cash flow, not by passing it on to all members. Also, if the money is being spent on developing new services, I expect the fees to be dialled down once these systems are developed.
If you’re concerned you’re paying too much for your Super fund, there are plenty of free comparison sites and reports available to all Aussies. Stockspot produces its annual Fat Cats report each year. That’s an easy read to get ‘the lay of the land’ in Super and consider your options.
Remember: paying 1% or 2% more in fees now could have a disastrous effect on your financial wellbeing later in life. It’s well worth the hour it takes to shop around.
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Disclaimer: Any information contained in this article is limited to general financial/investment advice only. The information has not taken into account your specific needs, goals or objectives, so please consider consulting a licenced and trusted adviser before acting on the information. Please read The Rask Group’s Financial Services Guide (FSG) for more information. This article is authorised by Owen Raszkiewicz of The Rask Group, which is a corporate authorised representative No. 1264179 of Strawman Pty Ltd (ACN: 610 908 211) (AFSL: 501 223).