Australians paid $31 billion as fees to fund managers to handle their superannuation funds last year, according to a study by Rainmaker.
These numbers put it in perspective.
- There were 28 million pension or superannuation accounts in the country, according to the The Association of Superannuation Funds of Australia Limited
- A total of 12.06 million Australians were employed as of March out a population of 24.5 million, according to government statistics
- Australian retirement assets totaled $2.3 trillion, the fourth largest such savings pool in the world
This works out to a fee of $1,107 per pension account a year, or $2,570 for every employed Australian. That compares with the average weekly total earnings of $1,164.60.
The following chart from Rainmaker shows the distribution of fees.
The survey also underscores that the Australian savings pool isn’t gaining from the economies of scale as one would expect.
While total retirement assets soared 11% in the year to March 31, total fees paid by members across Australia stood at 1.18% last year from 1.19%, the previous year.
As the following table points out, the drop in fees has slowed to a trickle. From 1.33% in 2010, it fell to 1.19% three years earlier thanks to reforms by the government to institute a low-fee passive investing product. Since then the numbers have stagnated while assets have soared.
Fees are coming down predominantly because of falls in administration fees, which are often paid out when an account is set up, rather than falls in investment fees, Rainmaker said.
The nation’s retirement assets are projected to reach $7.6 trillion by 2033, according to Deloitte.
The estimate is based on the guaranteed pension contribution climbing to 12% from 9.5% now and investment growth, Deloitte says.
Australia introduced a compulsory retirement savings plan in 1992 to address the burden an ageing population would exert on the pension system and public finances.
While that has boosted assets, the focus is shifting to fees in a low yield environment. There are nine different type of fees the funds charge including exit and activity-based fees, according to the Australian Securities & Investments Commission.
A 1% difference in fees now could be up to a 20% difference in 30 years, the regulator says in its website.