The median administration fees on Choice products are 40% higher than for median MySuper products, according to a regulatory review.
A study by the Australian Prudential Regulation Authority (APRA) analysed 568 Choice products, which accounted for $859 billion of superannuation assets. The products offered 9,000 different investment options and 43,000 in total.
Based on a member with $50,000, APRA said the median administration fee on Choice products were 40% higher than the median MySuper product.
As at 30 June, 2020, Choice members paid $242 per annum compared to $173 for a MySuper product.
When the assets were increased to $100,000, the administration fee rose to $391 for a Choice product and $261 for MySuper.
Approximately half of all products which had fees greater than 1.5% of assets were legacy products.
Source: APRA
APRA acknowledged that Choice products might have a wider range of features and ancillary benefits which may have justified the higher fees but, in other cases, the fee may be due to “inefficiencies in the trustee’s operations”.
The Choice heatmaps, which were expected to be active from late 2021, would help to expose those products which were charging high fees and delivering poor investment outcomes, it said.
Margaret Cole, executive member of APRA, said: “The new choice product heatmap will make clear which trustees have underperforming choice products and where they need to lift their games. Trustees are expected to identify the reasons for their underperformance and take prompt action to address those issues”.
