A recent Grattan Institute report has blown the lid on the Australian super fund fees rip-off. The report, released earlier his year, was given the title, the ‘Super Sting’ and pulled no punches.

The fees charged by Australian superfunds work out to be roughly three times the median rate of funds in other developed countries. This equates to more than $20 billin being drained from superfunds each year.

The report calculated that the average 50 year-old Australian would lose almost $80,000 (in today’s terms) in the more expensive funds, as against their cheaper counterparts, in fees before they retire. Younger contributors will lose up to $250,000 – or about a quarter of their total balance.

He report claimed that, as a whole, Australian funds were siphoning off 1.2% of all funds and earning.

For a government intent on pushing its constituents towards self-sufficiency this is alarming. It takes no more effort to manage a $20,000 portfolio than it does a $10,000 portfolio, and yet fund managers charge as a proportion of the lump sum.

The government’s freeze on pushing the super guarantee from 9.5 per cent to 12 per cent did little to hurt fund managers. According to the rport the fees already being charged are flagrantly excessive and in no way represent the cost of running your fund.

At the heart of the problem is the obfuscation of super fund information. Fund managers have made it deliberately difficult to compare their products and the yearly updates mean little to those not already working in the field.

David Gruen from the Australian Treasury. Photo: www.theaustralian.com.au

David Gruen from the Australian Treasury. Photo: www.theaustralian.com.au

David Gruen, from the Australian Treasury, took super funds to taks for ‘high’ fees. “Significant reductions in superannuatin fees would have widespread benefits for society as a whole,” he said.

More recentl, the Financial Services Inquiry, headed by former commonwealth banker David Murray, has broadened its scope to include invesigations into superfund fees.

A draft report said, “There is little evidence of a strong fee-based competition in the superannuation sector, and operating costs and fees appear high by international standards.”

Check your super fees. If you’re paying 0.5 per cent you’re doing well. If you’re paying 2.5 per cent it’s time to change accounts.

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