Change is in the Air: Fees & Costs in Super from 30 September 2022
From 30 September 2022, all super funds, and other financial services organisations, must comply with new disclosure regulations set out by the Australian Government. The Australian Securities and Investments Commission (better known as ASIC) has issued guidance on these new requirements: ‘RG 97: Disclosing fees and costs in Product Disclosure Statements (PDSs) and periodic statements’.
If you’d like to get into the nitty gritty details, you can view ASIC’s regulatory guidance here. Or for those of you who’d rather the summary, we’ve created this overview for you.
Superannuation is designed for retirement, and there are huge sums of money invested in super, so there are strict regulations about the way super funds operate. While the Australian Government sets the legislation for super, there are several key organisations that enforces it.
Most super funds are regulated by the Australian Prudential Regulation Authority (APRA), whereas the Australian Tax Office (ATO) regulates self-managed super funds (SMSFs). Future Super Fund (Future Super) is an APRA-regulated fund.
ASIC enforces the legislation which regulates the conduct and disclosure obligations of super funds, and has a memorandum of understanding with both APRA and the ATO to help with the exchange of information between regulators.
Disclosing the details
When joining a super fund, you’re acquiring a financial product. And, like when you’re choosing between other products, it’s important to find out what you’re getting and what it costs.
The Product Disclosure Statement (PDS), Target Market Determination (TMD) and other important disclosure documents provide information about the product - in this case, investing your super with a particular fund. In the PDS you’ll find information about the super fund, its investment options, the fees and costs, insurance (if applicable), and details about how to contribute to, and withdraw from, the fund. The TMD provides an overview of the types of consumers that the product has been designed for, to help you decide if the product might be right for you.
Super funds are required to provide these disclosure documents to members as they join the fund. The documents can be provided digitally. Most funds will also have their PDS documents on their website. You can find ours in the Documents and Forms section of our website here.
What’s changed with these regulations
ASIC has changed the way that super funds are required to present the fees and costs in their PDSs and statements with the intention of making it easier for members to compare fees and costs across funds (more on this in a moment).
Here’s a rundown of the key changes:
Fees and costs are now broken down into:
- Ongoing Annual Fees and Costs
- Member Activity Related Fees and Costs
This is intended to give you a better understanding of the fees and costs that you pay because you have an account, and the fees and costs that you incur only if a particular activity is undertaken.
Administration and investment fees are now broken down into:
- Fees - generally paid by you from your account
- Costs - generally taken from the calculation of the investment return before it is paid into your account
Transaction costs, which relate to the buying and selling of investments, were previously captured in investment fees and costs but are now shown separately
- Indirect costs are no longer shown separately and are instead included in the calculation of ‘Investment fees and costs’
Two additional costs are now required to be disclosed: costs paid by third parties and costs paid from reserves:
- If your fund relies on third parties and/or reserves to pay admin-related costs, you’ll now find that disclosed in the ‘Administration fees and costs’ section.
- It’s important to note that these are not costs paid for by the member and not all funds incur these types of costs.
So, what’s changed for Future Super?
We’ve always been transparent with the way we display information about fees and costs, as well as where we invest. With the changes to how fees and costs are now calculated there has been a slight increase in the costs associated with having a Future Super account.
For example, for a superannuation balance of $50,000 in Future Super’s Balanced Index option, prior to 30 September 2022, you’d expect to pay approximately $477.50 per year in fees for holding a Future Super account. You can see a demonstration of this below:
With the same balance, from 30 September 2022, the expected annual fees are $705.50. However, $215.50 of this total amount will not be charged to your account and is paid by a third party. You will therefore be charged total fees of $490. This excludes any additional fees and costs, including those associated with insurance.
As part of this change, we are required to display third party costs as well. Third party costs are those paid by Future Super directly. The changes from 30 September 2022, also mean that we are required to display third party costs (which are paid by Future Super) in the fees and costs breakdown in our PDS. We will include these fees and costs in the example of annual fees for a $50,000 balance, please note that these are not an additional cost to members of the Fund. You can see a demonstration of this below:
For Accumulation accounts, the Fees and costs of each Investment option are set out in the PDS and Additional Information Booklet. For Pension accounts, the Fees and costs information is set out in the Pension PDS.
Comparing fees, comparing funds
Comparing superannuation funds can be difficult. We see a benefit of this recent change being that all super funds are now required to display the estimated annual fees and costs associated with all their investment options for an example balance of $50,000. This is called “Cost of Product”. It means that you should be able to look on the website of a super fund and get a clear figure of approximately how much it will cost to invest for a year in each investment option offered by the fund, for that example balance.
Of course, fees are just one factor to consider when you’re deciding on what fund is right for you. You should also consider your age, your investment timeframe, your risk tolerance, what other investments you hold and how they are invested. You may also like to consider if your super is invested in alignment with your values.
Make sure to check out the fund’s performance, although past performance is not an indicator of future performance. A financial adviser can also provide you with advice for your personal situation.