Undue attention on super fees: SuperRatings

There is an unjustified spotlight put on superannuation fees, with insufficient attention paid to overall investment outcomes for fund members, according to SuperRatings.

In its analysis of key trends and issues in the super industry, SuperRatings said ‘net benefit to members' is the most important indicator of member outcomes.

"While competitive fees and charges are important, the quality of fee disclosure across the industry is extremely varied," SuperRatings said.

"In SuperRatings' view, whilst fees are important, a race to the bottom in terms of fees is unlikely to deliver better outcomes for superannuation fund members."

VIEW ALL

View all

Net benefit to members is an effective measure because it is the level of investment earnings minus fees and taxes. This also allows for comparison between active and passive structures, and sees whether a provider has added excess value to their members' accounts after fees and taxes.

The comments come even as the Financial System Inquiry argued the super system is not operating efficiently because of a lack of strong price-based competition, and consequently the industry is not able to enjoy the benefits of its scale.

"These benefits have been offset by higher costs elsewhere in the system rather than being reflected in lower fees," it said.

The inquiry also said if average fees in APRA-regulated funds came down 30 basis points, member balances and funds available for long-term investment would jump by more than $3.5 billion per annum.

Looking forward, SuperRatings believes funds will devote much of their time to assessing service providers, particularly administrators, custody and insurance providers.

"Administration continues to be a key challenge in the industry, with a lack of automation and a reduction in the number of active providers evident," it said.

It added insurance also remains a point of concern for funds, as premiums go up due to worsening claims experience and the rise of lawyer participation.