Industry split over super fee hike

A new fee introduced by Australia's largest superannuation fund has divided the industry, with many questioning its legitimacy.

Earlier this month AustralianSuper notified members it would be introducing a new fee called  'Administration fee - Protecting Your Super'.

From April this year, all accumulation members will pay up to 0.04% of their balance - in addition to the existing $2.25 admin fee - to offset the impact of the recent Protect Your Super (PSY) reforms, specifically the 3% fee cap applicable to balances of less than $6000.

It comes less than 12 months after the last increase to admin fees by the fund.

The new fee has been met with skepticism, with consumer groups, industry insiders and even government questioning the $177 billion fund's move.

A spokesperson for Assistant Minister for Superannuation, Financial Services and Financial Technology Jane Hume told Financial Standard the PYS fee cap would only hurt AustralianSuper for accounts with balances under $4000; the number of which has not been disclosed to Treasury.

In addition, the spokesperson said that AustralianSuper has been a net beneficiary of recent account reunification efforts by the ATO - also a part of the PYS changes.

Explaining the fee, AustralianSuper said the 3% cap on fees for members with a balance of less than $6000 "reduces the funds available to cover administration costs, products and services for all members".

According to APRA statistics, in June 2019 AustralianSuper had 241,000 accounts with a balance of less than $1000. Half of all its accounts have less than $25,000.

Super Consumers Australia director Xavier O'Halloran labelled the justification for the fee underwhelming.

"We understand they were one of the biggest beneficiaries of the consolidation reforms, with this inflow of funds it is unclear why they haven't been able to find efficiencies to cover administration costs," O'Halloran says.

"Calling this a 'Protecting Your Super' fee is brazen. If this represents the true cost of doing business, they shouldn't be looking to shift blame onto important consumer protections for this added fee."

A fee of this sort is not new. In 2018 Colonial First State introduced a 'regulatory reform fee' that amounted to an additional $102.50 per year for some members in its FirstWrap Personal Super product.

Rainmaker research shows that AustralianSuper's overall fees remain comparatively low. In 2019 the fund ranked 14 of 99 MySuper offerings for cost to members on a $50,000 balance; a rank that doesn't change with the added fee.

That said; analysis of super funds' operating expenses shows scale doesn't always necessarily equal efficiency.

APRA fund-level data shows AustralianSuper's operating expense ratio (OER) is not dissimilar to that of several other - some far smaller - funds, despite its massive FUM.

AustralianSuper has an OER of 0.2%, the same as Vision Super, AMP Superannuation Savings Trust and First State Super.

UniSuper is most efficient, with an OER of 0.1%. This is despite UniSuper having less than half the FUM of AustralianSuper.

It remains to be seen whether other funds will follow suit, however QSuper - the second largest fund by FUM and has an OER that is 0.02% higher than AustralianSuper's - told Financial Standard it will not change its fees.

"QSuper has cut admin fees three times in the past five years (0.22% to 0.16%) and we are not currently considering increasing admin fees," a spokesperson said.

"Given QSuper's fees, the PYS fee caps do not impact our members as the fees our members pay are well below the 3% cap imposed by the legislation."

Association of Superannuation Funds of Australia chief executive Martin Fahy declined to comment specifically about the AustralianSuper fee hike but said regulatory changes can affect fund fees.

"This needs to be borne in mind as regulators implement their reform agenda," he said.

Just last month, AMP dumped a fee it introduced in 2013 to finance the implementation of the Stronger Super reforms.

Read more: AustralianSuperAPRAUniSuperAMP Superannuation Savings TrustColonial First StateFirstWrap Personal SuperJane HumeMartin FahyMySuperSuper Consumers AustraliaVision SuperXavier O'Halloran
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