It’s not often talked about, and moreover, there’s not much you can do about it, but superannuation funds are taking $21 billion away from Australian every year – and it’s time the government helped out.
The Grattan Institute are calling for the government to change the high administrative costs and the convoluted way in which the superannuation sector currently operates. There are multiple accounts for people, too many different funds, and so many fees and yet nothing has been done to help the average Aussie get more in their pocket in retirement.
According to Jim Minifie from the Grattan Institute, “We pay $4 billion a year above what would be charged by [low cost, well administered] lean funds.
There are significant opportunities to reduce costs in both [default and choice] funds. Over time, the difference between a lean fund that charges say $125 per person and what’s implied in MySuper fees today, is about $40,000”. That’s quite a lot of money; are you willing to lose it?
In his report, which he will present at the AFR’s Banking and Wealth Summit next week, Mr Minifie wants the government to run a tender to select funds to operate default accounts used by most working Australians, and to close and merge smaller funds.
He estimates these processes could save $1 to $2 billion a year over time and should be run ASAP, as Australians are currently paying more than $200 a year on administration fees for the average default super fund and almost $800 for a fund of choice.
And if you have a self-managed super fund, you’re all paying around $5 billion in administration fees each year. Is it time that changed?
Tell us your thoughts below.