competitive pressure being exerted by members opening SMSFs, which could have encouraged retail funds to reduce fees for choice products. Figure 5 Products by segment: retail and choice products have materially higher fees By contrast, fees for notforprofit funds have been largely flat over time, but on average remain well below the fees charged by retail funds. And fees charged by retail funds remain relatively high, at least for choice products. Roughly 14 per cent of member accounts appear to be paying annual fees in excess of 1.5 per cent of their balances. Fees can explain a significant amount of the variation in net returns across super funds. Funds that charge higher fees tend to deliver lower returns, once both investment and administration fees have been netted off (figure 6). And highfee funds which hold about 10 per cent of the — system’s assets tend to have persistently high fees over time. This suggests there is significant — potential to lift retirement balances overall by members moving, or being allocated, to a lowerfee and betterperforming fund. Moreover, at least 2 per cent of accounts are still subject to trailing adviser commissions — despite such commissions being banned for new accounts by the Future of Financial Advice laws. Though largely a legacy problem, these commissions can materially erode member balances. In addition, high exit fees in some choice products can create a barrier to member switching, across both the accumulation and retirement phases. Analysing fees is bedevilled by significant gaps and inconsistencies in how funds report data on fees and costs, despite regulator endeavour to fix this. This lack of fee transparency harms
competitive pressure being exerted by members opening SMSFs, which could have encouraged retail funds to reduce fees for choice products. Figure 5 Products by segment: retail and choice products have materially higher fees By contrast, fees for notforprofit funds have been largely flat over time, but on average remain well below the fees charged by retail funds. And fees charged by retail funds remain relatively high, at least for choice products. Roughly 14 per cent of member accounts appear to be paying annual fees in excess of 1.5 per cent of their balances. Fees can explain a significant amount of the variation in net returns across super funds. Funds that charge higher fees tend to deliver lower returns, once both investment and administration fees have been netted off (figure 6). And highfee funds — which hold about 10 per cent of the system’s assets — tend to have persistently high fees over time. This suggests there is significant potential to lift retirement balances overall by members moving, or being allocated, to a lowerfee and betterperforming fund. Moreover, at least 2 per cent of accounts are still subject to trailing adviser commissions — despite such commissions being banned for new accounts by the Future of Financial Advice laws. Though largely a legacy problem, these commissions can materially erode member balances. In addition, high exit fees in some choice products can create a barrier to member switching, across both the accumulation and retirement phases. Analysing fees is bedevilled by significant gaps and inconsistencies in how funds report data on fees and costs, despite regulator endeavour to fix this. This lack of fee transparency harms
superannuation-assessment-draft-overview.docx