Bundled costs prevent meaningful fund comparison: The Actuaries Institute

Superannuation fund expenses, fees and costs should be split into investment and non-investment components to give members a sound basis for comparing the costs of multiple superannuation funds, according to The Actuaries Institute.

In a letter to the Australian Securities and Investments Commission regarding the contents of the product dashboard introduced under Stonger Super, Actuaries Institute superannuation practice committee convenor Andrew Boal said members needed to know and consider funds administration fees and costs, and the services provided for those fees; and investment fees and costs and expected net investment returns, in regards to all of the various investment options.

Administration fees and costs and investment fees and costs had different attributes, which made it necessary to demonstrate their impact on members in different ways, according to the institute.

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For example, administration costs incurred by a fund were usually higher in the year the member enrolled; they varied according to the level of contribution; and fluctuated from year to year, it said.

Investment costs varied for different types of investment and were typically higher for growth investments, although they generally remained stable from year to year as a percentage of assets (except for performance fees).

The Actuaries Institute said that the suggestion that costs for a single "balanced investment option" could be combined to present a clear picture to members was flawed.

There was no standard "balanced investment option", it said.

"Two funds could have the same basic fees and costs for their administration but the figures in the PDS could be very different because of the asset-mix used to calculate the cost for the ‘balanced option'," Boal said.

Members were not only selecting a fund because of costs — some wanted a different range of administration services due to their own individual circumstances, the institute claimed, while many wanted access to a wider range of product features and investment choices.

"Having separate figures ... is not only more accurate for comparison purposes but makes it easier to select a fund providing the administration services required, and the desired range of investment options," Boal said.

Of further benefit, separating the costs into administration and investment fees would do away with the confusing and unnecessary terms, ‘management costs' and ‘other management costs' currently specified in Corporations Regulations, according to the institute.

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