Super funds still squeezing fees

The downward pressure on superannuation fund fees is continuing as funds position themselves ahead of the next Your Future, Your Super (YFYS) superannuation performance test exercise.

The average fee being charged by funds overseen by the Australian Prudential Regulation Authority (APRA) declined last year, and a similar decline is expected this year, with most attention being focused on investment management fees which means that it is fund managers who will feel pressure.

Among the superannuation funds adjusting their fees last year was Australia’s largest fund AustralianSuper and this week, Australia’s second-largest industry superannuation fund, Australian Retirement Trust (ART) has told financial advisers that investment fees and costs and transaction options for its Super Savings products have been updated.

Deloitte actuarial partner, Andrew Boal yesterday confirmed that superannuation funds remained focused on fees not only because of the superannuation performance test but because of the members best interests requirements.

He said that funds had been tightening up procedures and processes to reduce procurement costs and improve outcomes for members.

A superannuation fund chief executive acknowledged the continuing pressure on funds to contain costs because fees “represent an anchor for the superannuation fund performance test”.

“All funds are now getting really sharp on fees,” he said but acknowledged that investment fees tended to get more focus than administration fees.

The focus on investment fees had, in turn, increased funds attraction to index managers while constraining their exposure to higher-cost active managers.

“The bottom line is that we all benchmark against the fee schedules of other funds,” the CEO said while pointing out that those of the mega funds were not necessarily going to be significantly lower than those of small or mid-size funds.

Recently-released superannuation fee data has confirmed wide variations in what superannuation fees ultimately cost members but the major funds such as ART and AustralianSuper are at or below the average.