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Australians paying too much in superannuation fees

It has been revealed that Australian superannuation fees are amongst the highest in the world. Many leading economists, including Treasury director David Gruen, are making a call for fees to be reduced, in line with national interests and an aging population.

Cumulatively, superannuation fees cost Australians approximately $20 million per annum. This represents about 1% of GDP and equates to an average of $726 per person each year. Our superannuation fees are three times higher than their British equivalents.

Recent research, conducted by the Grattan Institute, estimates that by halving super fees, funds would be, on average, 15% bigger by the time they reach pension phase.

According to the Grattan Institute, an indication that the Australian superannuation industry is insufficiently competitive lies in the fact that there has been no reduction in fees as superannuation savings have soared. Theoretically, it should not cost significantly more to run a fund managing $1 billion than it should to run a fund managing $100 million.

Posted on 8 July '14 by , under Super.

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Transition to retirement

The transition to retirement (TTR) strategy allows you to access some of your super while you continue to work.

You are able to use the TTR strategy if you are aged 55 to 60. You can use it to supplement your income if you reduce your work hours or boost your super and save on tax while you keep working full time.

  • Starting a TTR pension: To start your TTR pension, transfer some of your super to an account-based pension. You have to keep some money in your super account so that you can continue to receive your employer's compulsory contributions as well as any voluntary contributions you may be making.
  • Government benefits and TTR: The benefits you or your partner receive might be impacted if you choose to opt for this strategy. How and what exactly will change might become clearer upon discussing this with a Financial Information Service (FIS) officer.
  • Life insurance and TTR: In some cases, the life insurance cover you have with your super may stop or reduce if you start a TTR pension – check this before making any decisions or changes.

TTR can help ease your mind as you transition into retirement but it can be a bit complex. Before you choose whether you want to use TTR to reduce work hours or save on tax, or even if you want to use TTR altogether, you should figure out how this will impact all aspects of your finances.

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