Super funds operating expenses outpace asset growth in 2024 financial year

The prudential regulator says super funds’ operating expenses rose sharply to $12.7bn in 2024, driven by a sharp increase in the volume spent on advice.

Operating expenses at super funds have outpaced asset growth, according to APRA.

Australian superannuation funds’ operating expenses have risen sharply in the past financial year to $12.7bn, outpacing the growth of assets across the industry, according to the prudential regulator.

The second release of fund-level expenditure data by the Australian Prudential Regulatory Authority shows total industry expenditure was up by 15 per cent for the 2024 financial year ending June 30.

This increase slightly exceeds the percentage increase of growth in assets across the industry over the same period.

Across the industry, marketing spend was up 14.4 per cent on the prior year, while administrative costs grew by 10 per cent. Spending on member services lifted 10.3 per cent.

Super funds say increases in operating costs are warranted due to inflationary pressures driving up the cost of doing day-to-day business, while some increased spending on new hires to improve member services and strengthening operations.

Super Consumers Australia chief executive officer Xavier O’Halloran told The Australian there had been a larger increase in expenses across the board from administration expenses which fund day-to-day costs including staff, as well as the amount spent on external fund managers.

“We would have hoped with the scale of the superannuation industry that some of these costs would be starting to come down relative to the size of the sector, but we haven’t seen that. This makes it more important that the regulator is scrutinising what this money is being spent on,” he said.

“Paying fees on fund managers outside the fund has been behind some of the biggest increases observed in the APRA data as well as what individuals are paying for advice. Both of those went up last year by a lot.”

Spending on financial advice has increased amid reform by the federal government to allow Australians to tap their super fund for more guidance about their retirement and superannuation.

APRA reported that ASGARD Independence Plan Division Two had the highest financial advice costs among super funds at $376.92m. Colonial First State spent $295.7m, averaging about $478.87 per member. In contrast, Aware Super’s advice costs were much lower at $46.6m.

Advice fees are determined by the number of individual members who decide to seek advice, and members that choose not to engage don’t pay anything. They can be paid by the super fund to external advisers, and then billed on to those members.

Superannuation expenditure data released by APRA showed the country’s largest super fund, AustralianSuper, increased administration spending by 15 per cent in the 2024 financial year to $539.4m compared to $470.05m in the prior period.

Australian Retirement Trust, which houses the QSuper and SunSuper brands, had the highest operating expenses in the industry after expenditure increased by 7.1 per cent to $687.2m in the past fiscal year. This was against a 17.3 per cent uplift in assets under management to $310.2bn.

Operating expense ratio — which calculates administration expenses as a proportion of members’ assets under management — was 0.2 per cent for AustralianSuper and 0.3 per cent for Australian Retirement Trust, consistent on the prior year.

The Public Sector Superannuation Scheme for eligible Australian Government employees had the third highest operating expenses, at $329.1m against a backdrop of $118bn in net assets.

Association of Superannuation Funds of Australia chief executive Mary Delahunty said heightened attention on the level of service provided by funds reflected the significant resources funds are putting into lifting service standards.

“There also have been increased regulatory burdens (including higher levies paid to the regulators) placed on funds, increasing their administration cost,” she said.

“The APRA data also record a nearly 30 per cent increase in financial advice expenses for funds. Financial advice from a superannuation fund is an important way of providing low-cost or no-cost critical information to account holders.”

AustralianSuper chief operating officer Peter Curtis said the fund had moved to bring more operations in house which lifted expenses, but added it was key to its commitment every dollar spent was in the best interests of members. It cut marketing by 12 per cent in 2024.

“We have employed 75 people to open our Bereavement Centre, a specialist team to support beneficiaries at a difficult time, which handles all death claims through dedicated case managers from beginning to end,” he said.

‘We have also brought our complaints handling teams in-house so we resolve issues for members, with the build-out continuing in the 2025 financial year. We have added people to the dispute resolution team, and to handle insurance claims.”

Bringing the Bereavement Centre in-house and internalising the complaints process contributed to an increase in expenses. AustralianSuper also recruited for its office in London and invested in expanding its operations in New York.

Members in the Perpetual Super Wrap had the highest average account balance at $771,000, followed by $649,000 in the Commonwealth Superannuation Scheme, and $536,000 for the Public Sector Superannuation Scheme.

Among the larger funds, UniSuper had a $190,000 balance on average, while AustralianSuper had $100,000 and Australian Retirement Trust $118,000.

Deputy chair Margaret Cole said increased transparency and scrutiny of super fund expenditure are crucial since trustee decisions have direct implications for their members.

“The first-time release of fund-level insurance data will enhance transparency and hold trustees and insurers accountable to improve the value and service members receive,” she said.

“APRA will work closely with the Australian Securities and Investments Commission (ASIC) to ensure positive outcomes for members.”

Originally published as Super funds operating expenses outpace asset growth in 2024 financial year