Election 2022: Super funds eye fee haircut in homebuy plan

The nation’s super funds are facing a fee haircut if the Coalition’s super housing policy goes ahead, while investment bosses are eyeing a hit to their take-home pay.

The nation’s super funds are facing a hit to fees of up to $100m a year if the Coalition’s super housing policy goes ahead.

The nation’s super funds are facing a fee haircut if the Coalition’s super housing policy goes ahead, with Australia’s largest retirement fund, the $250bn AustralianSuper, among those looking at millions of dollars in lost fees if members start whittling down their nest eggs.

The looming hit to fees comes as top superannuation executives also brace for a trimming of their take-home pay as spiralling inflation, expected lower returns and potentially dampened fund flows threaten performance hurdles.

All up, the $3.5 trillion super sector clocks up more than $30bn a year in super fees, according to a 2020 inquiry into the retirement income system.

More than $200m could soon be wiped from the fee take each year, according to research group Canstar.

Early estimates for the Liberal Party’s plan to get more Australians on to the property ladder, meanwhile, put potential redemptions by prospective home buyers at up to $8bn to $10bn each year, according to Industry Super ­Australia.

Under the Morrison government’s plan, first-home buyers would be able to tap up to 40 per cent of their super savings to buy a home, up to a maximum cap of $50,000.

This means that to take the full $50,000, workers must have $125,000 in their super accounts.

On average, super savers in default investment options pay between 0.90 per cent to 1.15 per cent of their account balance in fees a year, depending on age and super balance, Canstar says.

For a super balance of $125,000, data produced by Canstar for The Australian puts the average fee at $1182 a year. If up to 200,000 members a year opt to access $50,000 from their super savings to buy a property, as ISA speculates will happen, the average annual fee is slashed by about $450.

The difference is more stark at the top end: for funds that charge higher fees, a $125,000 super balance would attract $1913 in annual fees. This is cut to $1148 at a $75,000 balance.

If the plan proves popular with first-home buyers, redemptions could initially amount to $100m in lost fees a year, on top of the billions set to flow out of the nation’s funds as a result of the policy.

Canstar finance expert Steve Mickenbecker sees the long-term hit as even higher. “Super funds will retain their members and the membership and administration fees, but with percentage-based fees averaging 0.39 per cent, a loss in billings could build over 10 years to around $234m a year,” he warned.

“The loss for fees can be covered by either cutting costs and maybe services, or through passing on higher fees to members. Across 14.5 million super fund members, the increase could be around $16 per member (a year) when the volume hits its peak.”

This estimate is over the longer term and growth in funds under management should “absorb the necessity for this modest increase,” he added.

The hit to fees vary, with the largest funds having some of the lowest fees on offer.

At AustralianSuper, the difference between annual fees for balances of $125,000 and $75,000 is $335.

At construction industry fund Cbus, the difference is $350, while at the Public Sector Superannuation accumulation plan, the super fund for public service employees, the difference comes to $460.

At industry funds REST and Hostplus, both of which have a younger demographic, differences are $370 and $550 respectively.

These estimates are at the top end of the potential fee hit.

Many workers will not have the required $125,000 in their accounts to take out the full $50,000.

Indeed, the tax office puts the median super savings for a 30 to 34-year-old Australian man at $37,764. For women, the median account balance is $32,904.

Based on these numbers, a man with the median account balance will be able to access just $15,105.60, while a woman with the median $32,904 balance will withdraw, at the maximum, $13,161.60 to top up a home loan deposit.