My review of three low-cost options to keep your super fees down

You’ll recall from recent columns that I am most unhappy at discovering I am paying 0.73 per cent in fees each year to my current super fund.

So this week I took a deep dive into three potential super fund options for me, and I’m about to share my findings with you.

Let me say from the start, however, that my results will not be applicable to everyone. I am a 41-year-old single person with a $350,000 balance, a high degree of financial literacy and a high appetite for risk.

People closer to retirement will want a higher proportion of their super invested in safer assets like cash or bonds, while younger workers may have an appetite for risk.Credit: Dionne Gain

I have decided that, at this stage in my life, I would like to have my super money invested 100 per cent in shares and – importantly – in passive ‘indexed’ share options: ones that deliver the broader returns of a diversified index of stocks, and which don’t pay active fund managers to try to pick winners for me.

This will not be the right investment strategy for everyone. Some people closer to retirement will want a higher proportion of their money invested in less risky assets like cash or bonds. Others will be interested in exposure to asset classes like commercial property and private equity.

I am a 41-year-old single person with a $350,000 balance, a high degree of financial literacy and a high appetite for risk.

Some will also believe in the ability of active managers to consistently deliver above-market returns by picking winning stocks (although these people will not be economists, who believe in ‘reversion to the mean’).

Personally, I want none of those things.

So, this week I researched three potential super funds in which I can invest 100 per cent in equities, with a 50:50 split between Australian and international indexed shares. It’s a non-exhaustive list and you should do your own research, but here are my current thoughts.

REST Super

REST Super is one fund that allows you to ‘build your own’ portfolio of investments, rather than simply opting for one of the more popular ‘pre-mixed’ asset allocations like ‘growth’ or ‘balanced’.

There is a flat admin fee of $78 a year, plus 0.10 per cent per annum of your balance, capped at $300 (on my $350,000 balance, that’s $300 for me), plus an ‘estimated’ 0.01 per cent extra admin fee (for me, $35).

All up, that’s $413 – or just 0.12 per cent of my current balance.

Interestingly, REST do not currently charge any investment, performance or transaction fees on their indexed options. They do, however, charge a ‘buy spread’ on amounts invested, currently at 0.11 per cent for indexed Australian shares and 0.08 per cent for indexed overseas shares.

I calculate that would be about $332.50 to tip in my existing balance, along with fees incurred for every new contribution – albeit only on the initial receipt of funds, and not in an ongoing way. Still, something to keep in mind.

Hostplus

In his smash hit book, the Barefoot Investor revealed he had his own super invested in Hostplus’ ‘Indexed Balanced’ option (he also used to work there). That option has a low investment fee of 0.05 per cent.

However, your money in that option is not invested 100 per cent in equities, but rather 75 per cent in shares and 25 per cent in fixed interest and cash. As I say, that may be a great option for many people. But for me, I’m comfortable with a higher shares allocation, in the knowledge that over time this should deliver me a better return on my savings.

Like REST, Hostplus also offers the option to mix your own indexed share investments. The investment fee on Australian shares (indexed) is just 0.04 per cent. For international shares (indexed) it is 0.10 per cent unhedged and 0.07 per cent hedged (and yes, you did read that right, it’s a bit odd because presumably there would be greater costs in hedging, but there it is).

So, if I had half my money in Australian shares (indexed) I calculate I’d pay $70 a year in investment fees plus $122.5 a year for international shares (indexed and hedged). So that’s $192.50 for investment costs.

Add to that Hostplus’ flat annual admin fee of $78, plus a reserve charge of $32.24, plus a trustee fee at 0.0165 per cent ($57.75 for me). That’s a grand total of $360.49 a year in fees - or just 0.10 per cent of my balance. Which does seem very low indeed, particularly compared to what I am currently paying.

Australian Retirement Trust (ART)

A third option I also explored at the urging of a few people was ART, or the old QSuper.

ART also charges low investment fees on index options (albeit higher than Hostplus) at 0.09 per cent for Australian shares indexed and 0.10 per cent for International shares indexed (unhedged).

For my higher balance, however, the admin fees work out higher too, with a flat fee of $62.40 payable plus a 0.10 per cent admin fee (on the first $800,000 of balance) plus a 0.07 per cent reserve fee.

People with higher super balances, of course, get hit with higher dollar fees when charged on a percentage basis like this. Currently, I’d be paying ART $657.40 a year in admin fees, but that would grow to almost $2000 if my balance grew to $700,000 – at which point a SMSF may even be more economical.

All up, I estimated ART’s mix-your-own option would currently cost me $989.90 on my desired portfolio, which was less competitive in my case, at 0.28 per cent of my current balance.

So, what will I do? Sorry, still haven’t decided! Next week I’ll do a deep dive into SMSF costs, so stay tuned for that.

• Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. Investors should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.

Jessica Irvine is author of the new book Money with Jess: Your Ultimate Guide to Household Budgeting. You can follow more of Jess’ money adventures on Instagram @moneywithjess and sign up to receive her weekly email newsletter.

---

---

More from Money: How to make, save and invest

• Reward schemes: Are you better off giving all your business to one loyalty scheme to maximise the payback, or should you shop around for the cheapest prices and ignore points?
• It’s never too early to start savvy money habits. Saving money is good, saving money with the highest interest rate you can find is even better. We’ve searched for the best kids’ bank account interest rates and this is what we have found.
• Economics editor Jess Irvine and Money editor Dominic Powell break down the five most important things to consider when it comes to choosing a super fund in the money podcast you can actually understand, It All Adds Up.