There has been much discussion about using fees as the sole determinant in a tender process to appoint default funds. SuperRatings believes this is an ill-conceived concept and any assessment based on only one criteria, is fraught with danger. In our latest analysis, we have clearly debunked this notion, by showing that in many cases, the funds with the lowest fees do not necessarily provide a better retirement outcome or return for its members.
In fact this constant focus purely on fees could have a detrimental effect on Australians’ retirement benefits. There is very real evidence that funds are moving to passive investment structures whilst not passing on the full reduction in costs. This will lead to significant underperformance for these funds, thus resulting in lower retirement benefits for many Australians. Further, SuperRatings are concerned that substantial profits are being made by some funds charging excess investment fees for their passive investment products. Whilst we believe there is a place for passive investment products, they must be appropriately priced to ensure that the net benefit to the member is reasonable and competitive.
SuperRatings has recently completed a review of all major superannuation funds that have a 10 year performance history. For each of these 162 funds, a net benefit calculation (taking into account Superannuation Guarantee contributions, fees, taxes and investment returns over a 10 year period) has been applied, leading to some surprising results.
Source: SuperRatings
