Small fee increases cost nest eggs $77k: Vanguard

A new analysis from Vanguard Australia shows superannuation funds charging marginal fee increases can cost members $77,000 in retirement.

Full-time workers paying an extra 0.5 percentage points in fees each year can cost $77,000 by the time they reach retirement, Vanguard notes, calculating this to be equivalent to 12.5% of their total balance.

The modelling compared two hypothetical MySuper scenarios for a member aged 25 with a starting balance of $24,004 and starting salary of $83,200, retiring at age 67.

Both scenarios assumed a 6.4% nominal annual investment return, Superannuation Guarantee contributions of 12%, and standard tax and life insurance costs of $1733. The only difference was fees from one account charged 0.56% p.a. while the other charged 1.06% p.a.

With the average super fund charging around 0.9% p.a., Vanguard found members may overpay without realising the long-term impact.

Vanguard Australia chief of personal investor Renae Smith said rising inflation and cost-of-living pressures make it more important for retirement savings to work efficiently.

"Australians are careful about comparing mortgages, energy and insurance bills, but when it comes to super fees, it's still far too hard to work out what you're actually paying," Smith said

"Coming to the end of the financial year is an ideal time for people to engage with their super and take a close look at all the fees they are paying."

Rainmaker Information research showed superannuation fund fees fell for the sixth consecutive year. MySuper fees on average fell by 0.07% p.a. to 0.87% p.a.

Super fund members, including SMSFs, paid an aggregate of $34 billion in fees in FY25.

Smith added super funds can charge up to six different types of fees, including administration, investment, transaction, insurance and activity-based charges, leaving 60% of members confused by these costs and lack confidence in explaining them.

"Reviewing your super fees is one of the key steps you can take to improve your long-term outcome. But people don't find it easy to compare, because the industry doesn't make it easy," she said.