A study previously released by the Productivity Commission found that Aussies who went from the worst to the best performing fund based on fees could pocket $660,000 in retirement.

While the benefits for members is clear, Creation Wealth’s senior financial planner, Andrew Zbik, opined that many Australian workers do not even know the fees they are paying and why they are paying them.

As such, Mr Zbik explained the seven most confusing fees for members.

1. Administration fees

Starting with the simplest fees and arguably the most notable, administration fees are, as the name implies, fees that cover the administration for the superannuation funds.

“Administration fees cover the website and online portal for you to log in and view your superannuation balance. It also covers the software which the superannuation fund uses to keep track of your contributions into the superannuation fund and the reporting of how your superannuation balance is performing,” Mr Zbik explained.

Typically, this fee can be a fixed dollar amount and/or a percentage of your superannuation balance. For example, Australian Super charges a fixed weekly fee of $2.25 plus a percentage fee of up to 0.04 per cent of your superannuation balance.

2. Management expense ratio (MER)

Here is where the fees start to get a lot more confusing.

According to Mr Zbik, the management expense ratio (MER) discloses the fee that is paid internally within a mutual fund. For example, a pre-mixed investment option with an industry fund, or the internal fees of a managed fund or exchange traded funds that you may invest in with a retail superannuation fund.

“This measures the fee paid to the manager who chooses how your assets are invested. It also covers the internal administration costs of the pre-mixed investment option, managed fund or exchange traded fund,” he said.

However, you will not see this fee being debited from your superannuation fund member statements or cash statement.

“As the fee is paid from within the investment option, it is effectively debited from any income distribution that is then made to your cash account,” he continued.

This fee does not cover internal brokerage and transaction fees within the pre-mixed investment option, managed fund or exchange traded fund.

3. Indirect cost ratio

Similar to the above, this fee is often used instead of the MER, and in summary, the indirect cost ratio will include more fees in its calculation than the MER.

As Mr Zbik explained, the fee covers indirect costs and can include performance fees – a bonus paid to the fund manager after meeting a performance hurdle, i.e. +2 per cent additional return over a set benchmark, e.g. ASX 200 share index, plus investment-related legal, accounting, auditing and other operational and compliance costs.

4. Custodian fees

While not all superannuation funds charge a custodian fee, Mr Zbik said some of the funds might be charging these fees to members.

“A custodian is usually a special company overseen by a separate board of directors which owns the superannuation assets on behalf of the members of a superannuation fund,” he explained.

“They provide an additional and important check on how the fund’s assets are being managed.”

5. Transaction fees

Again not all superannuation funds charge this, but some will charge members a transaction fee when they change their investment option.

“Most industry funds will allow you to make one or two ‘switches’ between any of their investment options within a year. If you start to make a ‘switch’ above the permissible free ‘switches’ each year, a fee of between $15 to $30 per ‘switch’ may be charged,” Mr Zbik said.

He further explained that, “for retail and self-managed superannuation funds, there may be a brokerage or transaction fee each time you buy or sell a managed fund or direct shareholding.

“Most retail superannuation funds will charge a transaction fee of between $15-$25 per transaction.”

6. Buy/sell spreads

In some superannuation funds, when you change your investment option, you may not be charged a transaction fee but a ‘spread’ if you are buying or selling in or out of that investment option.

“For example, if you have the ‘balanced fund’ option and are moving your super monies into this option, you may effectively be purchasing each unit for $1.01. If you are moving your super money out of this option, you will be selling each unit for $0.99. This difference is called the buy/sell spread,” Mr Zbik clarified.

7. Adviser fees

Finally members who have a financial adviser as part of their superannuation might be slugged a financial adviser fee.

This can be a percentage amount or a fixed dollar cost, pending the pre-agreed arrangement between the superannuation fund and its member.

Highlighting the seven are not a complete list of fees, Mr Zbik said they are the most common.

He also opined that “fees are not the only thing to consider when choosing a suitable superannuation fund”, Mr Zbik concluded.