I am pretty confident that most people in Australian society reflect on the cost of living at some point in time if not every day. A cost that is hidden away from us is the cost of investing in superannuation. We don't generally have access to the money until we are well into our 50s and the costs are not coming out of pocket directly. However cost will impact the end result come retirement and should be a priority for people when setting up and monitoring their superannuation accounts.
The Australian newspaper has published today a piece highlighting that super funds are pushing up their fees. It reports that the "average member of an Australian company's default super fund is paying 1.44 % of their balance, or $748 a year, in fees and charges, up from 1.33 % last year".
Some might think a 0.11% increase is nothing. The table below highlights the impact of such an increase on a $50,000 portfolio over the relevant time frames assuming you received 13% returns before fees.
|
Years to retirement: |
30 Years |
20 Years |
10 Years |
|
Returns on 1.44% fee account |
$1,331,144 |
$445,800 |
$149,298 |
|
Returns on 1.33% account |
$1,371,089 |
$454,674 |
$150,777 |
|
Difference |
$39,944 |
$8,874 |
$1,479 |
|
% |
2.91% |
1.95% |
0.98% |
Fees of course are not the only story. Having a super fund that offers an excellent investment philosophy, good quality insurance and excellent service is also important.
At A Clear Direction Financial Planning all four aspects are important when we discuss with our clients their superannuation needs. However we believe that ensuring you have a low fee fund is crucial.
To put our money where our mouth is, the fees for a balanced style superannuation fund (70% growth assets) based on our investment philosophy would have fees of 1.44% at a balance of $75,000 held in the fund. This percentage fee then reduces to 1.41% at $100,000 of investments. On top of this clients receive ongoing personal financial planning and advice.
Regards,
Scott Keefer
