A new report from the Grattan Institute Australians are paying up to three times more than they should for superannuation in management fees .
Australians on average pay fees of 1.2 per cent on their superannuation account balances, more than three times the median OECD rate and these excessively high fees are seriously damaging their retirement balances and hurting taxpayers, who pay more for pensions when superannuation runs short.
Do higher fees mean better returns?
The simple answer is no!
The report suggests that these high fees are not justified by high returns – Australian funds that charge the highest fees consistently deliver lower returns than other funds once their fees are taken out.
What this means to you
On conservative assumptions that means a 50-year old Australian today will have his or her super balance reduced by almost $80,000 in fees (in today’s dollars) at retirement.
A 30-year old will lose more than $250,000, or about a quarter of his or her total balance.[sam id=43 codes=’true’]
According to the report under a fairer fee structure, at least half that money could be saved.
The problem is with superannuation is that customers hand over their money each month but don’t receive a bill from their service providers. In fact the customer (you and me) don’t even pass on the money to the service provider – it comes directly form our employers so it’s silent and hidden and people don’t realise what they are paying.
Sure they get a statement once a year or so at tax time, but most don’t look at it or understand it.
However I’ve noticed a trend of more and more savvy investors taking control of the future by setting up a Self Managed Super Fund and using their funds to buy a property.
Here are a few more blogs about using a SMSF you may like to read:
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