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MySuper fees could halve in 10 years

Fees charged by MySuper products could halve over the next decade to a median of 0.5% per year, says Rainmaker Information which analysed the fees of 457 super products over the last six months.

The research found MySuper products charged members median fees of 1.1% for 2019-2020, which includes three main costs: investments, administration and member services.

This is much higher than average fees charged by international pension fund counterparts. New Zealand's KiwiSaver averaged 0.90% for the same period, US Public Sector retirement funds charged 0.55%, UK's Nest charged 0.51% while Sweden AP National Funds charged 0.15%.

On the brighter side, nearly 164 superannuation products (choice as well as MySuper) available in Australia lowered their fees in the six months ending January 2021. A much smaller number (47) increased their fees.

Rainmaker executive director of research Alex Dunnin said the firm's research continues to see evidence of concerted efforts by fund trustee boards to lower fees.

"Australia's superannuation system has long been considered to be a well-priced system charging fees around the OECD median. This has fuelled the view that superannuation fees in Australia are competitive and that we should be wary of the never-ending push for fees to keep going lower," Dunnin said.

"But while the comparison is valid, it ignores the 2021 political reality that the debate around super fund fees in Australia has reset due relentless public pressure.

"Explaining why this pressure has gained traction is that if the comparison shifts to focusing on developed world countries with which Australia probably counts as its peers, Australia's median superannuation fees in reality look expensive."

Dunnin said it is not unrealistic to expect Australian super funds to go from charging 1.1% p.a. in median fees to 0.5% p.a. over the next decade.

"But this timeline could shorten if the APRA super fund performance test pushes more funds to put more of their assets into lower cost indexed investments..." Dunnin said.

He said a quarter of MySuper products already have fees under 1% p.a, adding that diversified superannuation products that only use indexed investments are already much cheaper.

Read more: MySuperRainmaker InformationAlex Dunnin