Superannuation Fees: The 3 most important things you need to know.

Superannuation Fees: The 3 most important things you need to know.

When you hear the word ‘superannuation’ what comes first to mind? Is it fees? It is all too common to think of superannuation as a complex system that is only understood by people in white collars who work in high rise glass offices.  Unfortunately, people do not think about their superannuation until one day they wish to retire and they realise that they have made no previous inquiries as to how much money they need to retire comfortably or what the state of their superannuation is.

The layman takes it as a given that the fees that come out of their superannuation is something that cannot be controlled and thus they do not take the time to find out and shop around for a better deal. We know that superannuation can be an overwhelming topic to take head on and try to understand, but given that for the majority of people it will be the second biggest asset that they own after their family home, we believe it is a worthwhile investment of your time to understand this important asset of yours.

As your financial and business partner, we are here to equip you with the tools required to understand and ultimately be able to make decisions to build your current and future financial freedom. When the time comes to start your retirement phase of life, you want to be able to say that you have done everything within your power to bring yourself to the best situation possible given your circumstances.

If however, you don’t take the time to understand what contributes and takes away from your superannuation balance, you will come to retirement tens and even hundreds of thousands of dollars less than what you would have otherwise been entitled to had you taken appropriate measures along the way.

There are many things that you might miss out on such as going on holidays less often that you wish, an inability to live the lifestyle that you had envisioned whether that be travelling around the world or spoiling the grandkids. It could even mean struggling to pay the utility bills and thus be forced to go back to work in order to make ends meet.

Superannuation accounts come with many different types of fees. Things like member fees, which are charged for you to keep your super account, contribution fees, which are deducted from each of your contributions to cover the expense of investing them, and investment management fees. 

You can also be charged exit fees, for when you leave a plan or withdraw money, and switching fees, for when you swap out of an investment option. Outlined below are 3 important things that you need to know about superannuation fees. Ignorance is not bliss when it comes to superannuation and being mindful of these things now can make a big difference down the line:

1. Administration Fee

This type of fee is sometimes also known as management fee and it is charged by super funds to cover the cost of running your account. Sometimes it is charged as a percentage of your balance which means that as your account balance increases in value, the amount of fees you pay may increase as well.

2. Insurance Fees

These fees are your insurance premiums. The premiums are taken out of your super balance automatically. The premiums are determined depending on the level of cover you have, your age, and the type of work you do.

3. Investment fee

This is a fee to cover the cost of the superfund managing your investments on your behalf. This fee is dependant on your choice of investment which is determined by your risk profile. Usually this fee is also charged as a percentage of your balance and may include performance fees for when your fund manager exceeds their target.  

When I first started looking into my superannuation balances from various past employers, I realised I had multiple accounts with each one being eaten away by different types of fees. I had insurance policies that I wasn’t even aware of and I was paying premiums and commission that I did not explicitly authorise. 

Once I reviewed and compared the various providers, I was able to consolidate my superannuation into one. This not only minimised the fees I was paying but gave me peace of mind that I had taken control of my future and ensured that the money that I was working so hard for was now in turn going to work hard for me.

It is important to ensure that the topic of superannuation is front and centre in any conversation you have with your trusted adviser. Your adviser can help you ensure that your superannuation is working for you and that your best interests are accounted for.

Similarly to how the GST and tax returns are prepared regularly, it is also important to check in regularly with regards to your superannuation and ensure that any current arrangements are still appropriate given your life circumstances of any point in time.   

The following are 3 easy action points that anybody can do right now:

1. Create a mygov account and login to access a report that prints out all of your superannuation balances across any retail funds. This report will also tell you if you have any lost super that may be held with the government. Alternatively, ask your accountant to provide you with this report which they can access from their tax agent login to the ATO Portal.

2. Review and compare the super providers and the fees they charge. Seek help from an authorised financial adviser to help you understand the best provider given your personal circumstances. Your accountant may be able to provide you with a referral to a trusted financial adviser.

3. Regularly talk to your trusted advisor about your superannuation and ensure it is given due consideration every year. A good time to consider it is when preparing your annual tax return. As an authorised financial adviser, I am able to advise in relation to superannuation in particular self-managed superannuation funds. If you want to discuss any of the above, reach out for a consultation. You can make a booking here: http://bit.ly/SuperConsult