When it comes to Australia’s $4.3 trillion superannuation system, there are some things going particularly well, and others not so well.
One of the really positive signs is that administration costs in the investment phase have continued to fall, which is great news for super fund members.
In one sense super fund members are like fish in a barrel because it's a compulsory system so there are not too many incentives to reduce the fees on their accounts.
However, in practise the increasing ability to switch funds and significant pressure from regulators after the banking Royal Commission has led to a series of fund fee reductions.
Six Years of Falling Fees
The latest Superannuation Benchmarking Report by Rainmaker Information shows that the 2025 financial year once again saw superannuation fund fees fall for the sixth consecutive year.
Super fund members, including self-managed super fund (SMSF) members, paid an industry aggregate of $34 billion in fees during the year.
This is still a 5% increase in total fees paid but was handily outpaced by 7% growth across superannuation funds under management.
The result seems to confirm the idea that having fewer funds with more members would produce economies of scale which should be reflected in lower fees, which is still one of the main variables that super customers can use to choose the right fund.
The increasing use of passive, index-based solutions such as exchange traded funds (ETF’s) has also played a part in reducing the combination of investment and administration fees.
Mixed Messages at MySuper
Interestingly, fee benchmarks continued to fall across MySuper (default funds) and workplace products, however they increased for personal and retirement products.
MySuper remained the most fee-competitive segment, with the average MySuper fee falling by 0.07% a year to 0.87%, the seventh consecutive year of fee reduction.
Not-for-profit MySuper products recorded an 8% drop in total expense ratio (TER) to 0.85% a year, while retail MySuper products experienced a small increase of 2% to a TER of 0.96% a year.
Personal product fees increased by 9% which is the biggest growth across all segments.
Retirement product fees grew by 4.7% due to increases in retail retirement products, while not-for-profit retirement fees reduced by 4%.
Service Levels a Red-Hot Issue
At the same time as overall fees are falling, arguably service standards have been slipping.
Whether that is due to falling profitability or to management incompetence is hard to work out at this stage, although at least the industry regulators have been very clear about what sort of service delivery they expect.
The Australian Securities and Investments Commission (ASIC) released a scathing paper in March about the timeliness of the payment of death benefits which questioned whether the management and boards of some funds even understood how to measure the effectiveness of their processes.
That report had applied a blowtorch to funds of all sizes to get more focussed on their fund customers and delivering services with greater efficiency and monitoring.
Claims Handling Should Be Improving
Claims handling times is now something all funds should be focussed on, even though many funds seemed astonished that ASIC was even focussing on this area which was not even on their radar.
Apart from the emotional side of dealing with the spouse or other relatives of deceased members, there is also an actual financial opportunity cost that happens when funds or insurance payments take far too long to process claims and deliver the money.
That remains the case even if a super fund can “blame” a subcontracted company for its tardy claims performance – it is the overall customer experience that matters.
