Lowering administrative costs and the improved disclosure of fees to enhance competition should be the focus of the superannuation industry and its regulators, a study finds.
The study, by accounting firm Deloitte and Investment and Financial Services Association (IFSA) found Australian superannuation fees compared well with countries such as the US, UK, Japan and Denmark but could be lowered further.
The study, published on Tuesday, found that fees could be lowered by cutting administrative costs and enhancing competition by making fee comparison between funds clearer.
IFSA chief executive John Brogden said any such changes needed to involve the industry and that the government or regulator would need to drive the change.
“Getting clarity on administrative charges through regulation will result in a better outcome for consumers,” Mr Brogden said at a media briefing in Sydney.
“We need to get comparable data across super funds.”
IFSA represents organisations in the funds management and life industry.
The study said fees, including administration fees, were often disclosed as a percentage of a member’s assets, which was potentially misleading given that administration fees did not vary according to the amount saved.
Investment fees, on the other hand, were charged as a percentage by fund managers, so it made sense to express them that way, Deloitte actuarial partner and lead researcher Michael Monaghan said.
The government commissioned an enquiry in May, led by deputy chairman of ASIC, Jeremy Cooper, to examine the superannuation system, particularly its fees and commissions.
Mr Monaghan said one of the keys to fee reduction would be increasing the size of super funds to give them more clout in the international funds management industry, and by increasing automation and eliminating duplicate accounts.
“Size matter when it comes to being able to lower costs,” he said.
Super funds would get bigger as consolidation in the industry continued through takeovers and as money kept pouring in through compulsory contributions.
Mr Monaghan said the study had been difficult because of the lack of data on retirement savings in other countries.
Mr Monaghan said that Australian investment fees were often higher than in other countries because Australians had a higher proportion of growth and actively managed assets, which were more expensive to administer.
Australian investment fees were also somewhat higher compared to a place like the US, where very large funds were able to use their size to get better deals from fund managers.