Multiple fees – multiple super funds

I always see a lot of ads whether that be online / or on the TV encouraging people to consolidate super funds – with the sole purpose being to save on fees……

Although true to a certain extent, when you actually look through your super fund product disclosure statement (PDS) and see what fees are being charged where, a lot of the time the large proportion of fees are actually percentage base. These are often referred to as “investment costs”. Then there is usually a small flat fee which superannuation funds call an “administration fee” – this fee is usually fixed and I generally see ranges from $50 a year to a few hundred dollars a year. Noting these are just some examples of fees and it is important that you look into your individual funds to see what is being charged.

An example below where consolidating may even cost you more fees if you don’t do your proper research:

• Fund A might be your current fund your employer contributes to. It might have a balance of $100,000 and has a fixed administration fee of $70 a year and an investment fee of 1.10% (which equates to $1,100). So total fees are $1,170 p.a.
• You might have Fund B that is an old fund that has a balance of $100,000. Fixed administration fees of $100 p.a. and investment fees of 0.80% (which equates to $800). Or a total fee of $900 p.a.

Consolidating all funds into Fund A will cost $2,270 of fees per year, consolidating it all into Fund B will see you pay $1,700 of fees per year. Or doing nothing will see you pay $2,000 of fees per year.

You can see that in the above instance, without proper research, consolidating into Fund A will cost you more than just leaving it just as is. This is why it is important to do the proper research and seek professional advice. A lot of the time there are many other considerations that are looked at when consolidating funds that sit beyond fees and performances such as service levels, functionality, investment choice and even an important once is personal insurance offerings. These can sometimes be lost forever if you consolidate as due to your health you may not be able to purchase new personal insurances such as Life insurance or Income Protection in the future which may be important to you if you still have a large debt for example.