The Great Australian Superannuation Rip-Off: How High Fees Eat Your Nest Egg

Recently the Murray Report found that Australians are paying double the superannuation fees of other Western countries for their retirement. That’s costing me $20 billion dollars each year!

Why are Aussies being so badly ripped-off?

Well, I could blame the superannuation funds for slugging consumers with hidden high fees and bamboozling them with complicated 100-page booklets, but honestly, consumer apathy is resulting in me being taken for a ride. Most people simply accept their employer’s default fund and never get round to learning how to compare super funds. Maybe this is a consequence of the super guarantee system—quietly deducting a chunk from your wages before you notice, squirreling it away out of sight and out of mind.

The scary thing is how much can be lost. For instance, each 1% lost from your return reduces your final balance by about 20% over 30 years. The compounding effect of superannuation fees in Australia is a non-intuitive concept that the human brain finds incredibly hard to grasp.

In Australia superannuation is probably your second biggest asset after your home.

The truth is that Australian superannuation is probably your biggest asset (after your house), yet I’m willing to bet how rarely people read their statement in detail, let alone compare its performance to find the best super fund in Australia.

Not all superannuation funds are created equal.

Two major camps have emerged: traditional retail superannuation funds from the likes of the big four banks and insurers, and the newer industry superannuation funds created by industry bodies. When comparing an industry super fund vs retail super, the differences are stark.

Industry super funds are the superheroes of the Australian superannuation industry. They bravely put their members before themselves, unlike the shady retail superannuation funds which prioritise corporate profit over growing their customers' life savings. Retail super funds tend to have high fees and lower performance, whereas industry super funds are generally not-for-profit and pay no commissions, making them some of the lowest fee super funds with better performance.

Now, 1.89% might not sound like a lot, but believe me, it sure adds up over the years. Here’s an example of just how much of a difference that 1.89% can make. Prepare to be shocked.

An example: Meet Dave the plumber

Meet Dave. He started working at age 20 and was put into his company's retail super scheme, retiring at age 65. Let's assume he earned an average salary of $80,000 throughout his career.

At retirement Dave will have:

A balance in his retail fund of $1,362,212. Not bad, you say? But wait—this would have been his balance had he been with the average industry fund:  $2,248,762. That's a whopping difference of $886,550 he has lost out on!

So almost 40% of Dave’s total lifetime contribution has gone bye-byes, never to be seen again! Would Dave ever have realised this at retirement? Probably not, and besides, it’s too late.

The trouble is most people never get to see this side of the story. Your superannuation statement never adds up all the compounded fees and commissions or tells you what these would have amounted to should they have remained invested in your fund.

If they did, it might go something like this:

Dear Mr Smith,

Congratulations on working hard for 47 years. I am pleased to say that you have $1,362,212 in super for your retirement.

However I regret to inform you that my fees, commissions and poor performance have resulted in a yearly 1.89% cost,
which has deprived your fund of a total of $886,550 whilst you have faithfully been investing with me throughout your working life.
I hope you don’t mind that this is almost 40% of your nest egg and trust that you won’t miss it too much.

Thanks again for being such a great customer and so generously paying for my big beachside house.

Best of luck in your old age

Your Fund Manager


P.S. I would have told you earlier about the effects of my fees but you never once contacted me to check, so naturally I thought you weren’t really interested.

P.P.S. And thanks so much for not asking my advisors for advice, which you have been paying for all this time. That’s jolly nice of you not to bother me.

It does not have to be like this. The good news is most of you are free to switch to whatever fund you choose, and there are some standout low-cost options out there. With an hour or two’s effort, you can save yourself hundreds of thousands of dollars, which could make all the difference to you and your family’s retirement.

Don’t suffer like Dave and don’t let them get away with it. Start asking questions, take an interest, and take control.

Not sure where to start? I've produced a valuable report designed to educate Aussies on how to make the most of their superannuation. I've done the legwork and found a real knockout fund, which has the lowest fees in the industry.

Make your superannuation super with my choice for the best super fund in Australia.

Your superannuation should be a super annuation.