$18 billion in fees paid to super funds

The number of self-managed super funds could double as members look to cut costs

a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Superannuation funds have reaped in a record $18.6 billion in fees over the past year, with the average Australian paying $2,300 in super fees.

No wonder the self-managed super fund (SMSF) sector is surging.

According to a report by super fund researcher Rainmaker, cost estimates in the compulsory super system equate to 1.23% of super funds under management, equating to $18.6 billion a year. Super funds had a 'super' year in 2013, with the average balanced fund returning 15.6%, and the $1.6 trillion sector is expected to grow as the compulsory super guarantee rises to 12% over time.

Rainmaker director of research has told Fairfax Media that members are paying maximum fees at retirement, when their balances are the highest they will ever be, which is why so many are tempted to jump ship and run their own super fund.

Evidence of that was in Rainmaker's finding that SMSF's are the cheapest fund to run. It seems the days of the high fee retail super funds could be numbered, with a growing trend of balances moving to lower fee, not for profit industry funds and SMSFs.

According to research by the SMSF Professionals Association and Macquarie, the total number of SMSFs rose 7.3% to 503,320 at the end of March 2013, with close to one million members. The research also noted that one in twelve Australians say they plan to open a SMSF in the next three years. Should that happen, the number of SMSFs is set to more than double.

Wealth management companies running retail super funds such as Colonial, AMP Limited (ASX:AMP), MLC and BT Investment Management (ASX:BTT) will need to either lower their fees or change their fee model in order to survive.

Foolish takeaway

Big banks' earnings could also be at risk of falling, with Commonwealth Bank (ASX:CBA) owning Colonial, while MLC is the wealth management division of National Australia Bank (ASX:NAB).

Interested in our #1 dividend-paying stock? Discover The Motley Fool's favourite income idea for 2013-2014 in our brand-new, FREE research report, including a full investment analysis! Simply click here for your FREE copy of "The Motley Fool's Top Dividend Stock for 2013-2014."

More reading


Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned.

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »