Discussing a Grattan Institute report titled Super sting: how to stop Australians paying too much for superannuation, Vanguard’s principal and head of market strategy and communications, Robin Bowerman, said Australians are paying too much in super fees, which will make it harder for them to save for retirement.
“High fees naturally reduce account balances, with the Grattan report claiming that a 45-year-old in 2010 on median earnings will have his or her super balance reduced at retirement by more than $80,000 (or 20 per cent),” Mr Bowerman said.
“The younger you are, the worse the story gets, thanks to the compounding effect over time. A 25-year-old entering the workforce in 2010 will see their account reduced by more than $250,000.”
Mr Bowerman said the report also claimed individual account holder fees have gone from $550 in 2004 to $820 in 2013.
“That would be less of a problem if the funds were earning higher returns to compensate for higher costs,” he said, adding that high-fee funds “destroy returns” for members and on average, high-fee funds do not generate higher gross returns.
“A critical issue is the level of understanding among fund members of the fees charged: when fees are quoted at, say, 1 to 2 per cent, that may not seem overly high or alarming,” Mr Bowerman said, “but the real cost may be as high as 50 per cent of the return earned when looked at over a lifetime of savings.”
What a surprise to see an index following shop back the seriously flawed Grattan paper. Scanning the best NET returning funds for last 1 to 10yrs, I do to see too many of Vanguard’s type consistently mentioned.
A race to the bargin basement, fee only, KPI borders on inappropriate advice that any FP would be rightfully hauled over the ASIC coals for giving. Time to give this paper the real focus and debate it deserves – none.