![Many retail super funds are grabbing too much money in fees.](https://web.archive.org/web/20151223075207im_/http://www.smh.com.au/content/dam/images/g/k/a/s/8/d/image.related.articleLeadwide.620x349.gk9oxc.png/1450099539131.jpg)
Many retail super funds are grabbing too much money in fees. Photo: Perter Riches
The $2 trillion superannuation industry is a gravy train for the financial services industry.
It is an industry guaranteed to grow by virtue of employers having to pay a percentage of their employees' wages to a super fund.
We pay too much in super fees by international standards. However, there are huge differences in the fee-takes of the various superannuation sectors.
The "retail" funds tend to have the highest fees. These are the super funds run by for-profit institutions, such as the big banks.
It is these fees that, when averaged across the super sector, make our superannuation system one of the most expensive in the world.
The point is driven home by a report by researcher Rainmaker, commissioned by Industry Super Australia.
It shows retail super funds, which have about 30 per cent of superannuation savings, take about 50 per cent of superannuation fee revenue.
Not-for-profit funds, which include industry super funds, have about 41 per cent of super money but take just 25 per cent of fees.
Self-managed super funds, which have 29 per cent of super money, are paying about a quarter of all super fees.
The previous federal Labor government brought in MySuper to protect those members, the majority, who do not take an interest in their super – particularly those in retail funds.
The super fund that receives the employer super payments of those employees not choosing who manages their super is called the "default" fund provider.
That is most workers. Because they do not choose, their default fund is chosen by their employer, or specified in an industrial award or agreement.
It is important to appreciate that commissions can be paid to financial planners from a retail super fund, even when no advice is provided.
It is another reason the fee-take of some retail super funds is higher than their industry fund rivals, which have never paid commissions.
MySuper-compliant funds cannot pay commissions to planners, among other member protections.
All employer super payments already have to be going to a fund that is MySuper-compliant. But there is a mid-2017 deadline by which time accumulated savings must be moved.
While practically all industry funds have shifted their default members' accumulated savings into their MySuper-compliant funds, the retail sector is dragging its feet.
Commissions are still coming out of the super savings of members of many retail funds; though many will be receiving valuable financial advice in return.
As to how much anyone should be paying for super, there are different types of fees.
One is a flat-dollar administration fee, which is typically no more than a few dollars a week.
There is an investment management fee that is charged as a percentage of the super account balance.
There may also be a fee lurking in the annual statement that is really an advice commission, but will not be called a commission.
When all these fees are added together and taken as a percentage of the account balance a fee of less than 1.2 per cent is low, while less than 1 per cent is considered very low.