How do you find out the fees in your super?
I’ve been having a lot of discussions lately with clients that have read the Barefoot Investor. It’s awesome seeing people taking the time to focus on learning about their finances and what they can do to improve them. I’ve read the book too and found Scott’s budget style is simple and can work for a lot of people.
One thing that seems to get brought up is the focus on getting the cheapest super fund. Whilst I subscribe to the attitude that you get what you pay for, it’s always important that you know the fees of your super fund so you consider whether it is offering value for money. But how do you find out what the fees are?
One way is to call your super fund. They can explain to you what the fees are and any other questions you may have. In my experience however, some funds are better than others at this. Whilst some funds will outline exactly how much you are paying, many funds won’t necessarily give you the answers you need. I have spent large portions of my day calling super funds and in many instances, whether you get the right information depends on the knowledge of the person you are dealing with. Get someone good and experienced, you’ll be fine. But if you get a person new to the job, you can get some pretty confusing responses.
So how do you find out what your super fees are yourself? Well fortunately, there is a way and it isn’t too difficult. Each super fund is required to produce a document called a Product Disclosure Statement (or PDS for short). These PDS’s are all required to look the same which makes navigating them very easy. You can usually find the PDS by googling “[SUPER FUND] Product Disclosure Statement” or by going to the super fund’s website. Make sure that the PDS applies to your type of account as many times there will different accounts based on whether you joined through an employer or on your own.
The next step is to go to the ‘Fees and Costs’ section. Normally, this is section 6 of the PDS. There are a number of fees which could apply but the main ones I look for are the following:
- A Member/Administration Fee
This is usually either a percentage of your entire balance or a percentage and a flat fee.
- Investment Fee
Depending on what investment you have selected, you will be subject to an investment management fee which is again, usually a percentage.
- Switching Fees and Exit Fees
These are the fees you incur by switching between investment options or exiting the fund. Whilst these are usually one-off they can add up.
There are definitely other fees but having a good grasp of the above ones should help you understand the cost. There should also be an example in the PDS which will outline the cost for a $50,000 super fund. Just make sure you check whether the investment selected in the example matches your investment as you may be paying more than the example.
If you happen to have a copy of your last Member Benefit Statement, this would also contain this information.
This should hopefully get you started in thinking about your fees in your super fund. Remember, fees aren’t everything. Just because something is cheap doesn’t mean it is good. But understanding your fees and considering whether you are getting value for money for them is the first step to financial freedom.
This post is from our resident Financial Planner Ben Brett, check out his details in the About Us section.
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