The looming choice of fund rules are beginning to have a positive impact on superannuation fees, as retail providers cut costs to compete with cheaper industry and not-for-profit funds, a new report claims.
The KPMG report, based on an analysis of the administration fees of 23 corporate super master trusts, found that overall, costs have remained relatively steady over the past three years.
However, the report said a number of retail funds, including ING and Colonial First State, have either reduced fees or consolidated their fee structure in the past six months – a clear signal that ‘choice’ is driving costs down, KPMG claims.
KPMG superannuation services senior manager Wayne Hirt said while choice does not officially kick in until July 2005, the cost cutting proved retail superannuation providers were gearing up for a more competitive environment.
“I would say that retail providers getting their strategy in place for the introduction of choice of fund is the most likely explanation for the cuts,” Hirt said.
Although, despite the attempts by retail funds to make up ground, industry and not-for-profit funds remain the cheapest, according to report.
Of the 23 funds examined, industry and not-for-profit funds held the top seven places when ranked according to administration costs.
The Australian Retirement Fund, HESTA and the Superannuation Trust of Australia were the cheapest overall – charging and an administration fee of only 0.26 per cent of assets under management.
The KPMG report said fees would come under increasing scrutiny as the deadline for choice of fund approached.
“With the choice of fund legislation due to come into effect from July 1 2005, many employees will be able to choose the superannuation fund to which their Superannuation Guarantee contributions will be paid,” the report said.
“This is likely to have an impact on the way funds market themselves, with less emphasis placed on marketing to employers and more towards direct marketing to employees.
“In this environment, we anticipate that this will result in lower fees and simpler disclosure models. This is supported by the data utilised to collate this survey, where we have seen some retail funds lower their fees and revise their fee disclosure model by consolidating the various fees previously charged,” the KPMG report concluded.
