Admin fee backflip rewards 13 of the top 20 ‘fee-gouging funds’

By Cameron Micallef

August 26 2021
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Thirteen of the 20 funds that will benefit most from the last-minute changes to the Your Future, Your Super performance test are for-profit funds, new research has revealed.

As part of the Your Future, Your Super reforms, funds that were originally going to have to disclose eight years’ worth of admin fees will now only have to disclose one, giving some funds the ability to possibly whitewash years of exorbitant fees.

This is despite the fact that one of the key reasons the changes to super were implemented was to lift funds’ overall performance. Namely, a MySuper product that falls 50 basis points below the performance benchmark will be forced to ink a letter to its members informing them of its underperformance, giving members the choice to jump ship.

But since the latest government backflip, the fees under review will only include those in the last 12 months.

As such, new research released by Industry Super Australia revealed that not only will some funds benefit, but 13 of the 20 benefactors are for-profit funds, which have, as a result, all improved by more than 10 basis points.

The new reporting system will see retail funds now perform on average 7 basis points better, while non-fee charging industry funds fall by 3 basis points.

According to Industry Super Australia’s chief executive, Bernie Dean, millions of workers could be unknowingly stuck in a dud fund due to the government’s backflip.

“Some of the worst-performing funds could take advantage of the government’s sneaky backflip and pass the test when they may otherwise have failed, leaving millions of Australians unaware that they’re with a dud fund and could get a better deal elsewhere,” he said.

Naming names, the ISA noted that AMP Capital’s MySuper product will see an improvement of about 20bps in its performance.

BT and Commonwealth Essential Super will also see their performance assessment scores benefit from the last-minute administration fees backflip.

ISA noted that publicly available data shows that under the previous methodology, the funds that were at risk of failing the benchmarks may now move it out of the danger zone.

But the ISA is also worried about longer-term fee gouging.

“The government is letting some of the biggest dud funds off the hook, and it will be their members that will pay the price with less in retirement savings, compared to what they’d get if they switched to a better-performing fund,” Mr Dean cautioned.

About the author

Cameron Micallef

Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

About the author

Cameron Micallef

Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

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Retirement