Excessive fees on Superannuation

Be aware of fees and charges applied on a monthy basis to your superannuation balance. Your future retirement nest egg may be way smaller than you expect.
I make this observation as I recently worked very briefly for a Commonwealth government agency. This resulted in a superannuation guarantee contribution being made on my behalf of less than $100.
As a retired person over 65, I sought to withdraw the funds. I contacted the fund and was advised the balance was zero as fees and charges had been deducted.
The fees and charges included a monthly account fee of $8, total insurance premium deductions in excess of $60, an admin fee of $8 and a contributions tax. The funds had been in the account for less than 2 months.
My advice, check your superannuation fund balance regularly for ALL fees and charges. Shop around for a better fund if you are not happy. Income protection insurance premiums in super funds are a real eye opener.

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Where possible the best strategy is to nominate a super fund you currently have funds with when accepting any offer of employment.

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Many years ago, I decided (as a casual worker) that it might be prudent to carry personal super. It turned out to be a silly decision because of the fee issue. I put $2000 straight in, and then a few times managed to make deposits (not many). That was in 1991. I finally got round to doing something about pulling the money out in ~2014. What I received was $2150. So they had the use of my dosh for all those years and yet I only received a measly $150 on top of the original deposit. Never mind what I had put in, in the interim, which was maybe another $7-800.

I’d call that a loss

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This is potentially less likely to happen in the future with the introduction of the Commonwealth’s Protecting Your Super legislation which came into force on 1 July 2019.

Fortunately the Commonwealth government identified fees and charges as a major impediment for super accumulation with low paid workers and low superannuation balances, and introduced a maximum 3% cap of super funds with balances of less than $6000. There were also other provisions such as that pertaining to in super insurances and inactive accounts, to also reduce the whittling of super balances through unnecessary or significant fees and charges.

This website provides a good summary of the key changes


https://www.intrustsuper.com.au/news/superannuation-reforms-passed-into-legislation/

More detailed information on the changes can be found here


https://www.apra.gov.au/protecting-your-super-package-frequently-asked-questions

While the changes won’t help @64Hagar, it will potentially help other Australians in the future who have similar small superannuation account balances.

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I guess flowing on from this I received this advice from my super provider
From 1 April 2020 a new fee will apply to your super (accumulation) account. This fee is being introduced to offset the impacts of the Federal Government’s Protecting Your Super changes, which came into effect on 1 July 2019.

How the new fee will be charged

The new Administration fee – Protecting Your Super will be deducted from investment returns daily, before returns are added to your account balance. The fee is variable, up to a maximum of 0.04% pa of your account balance. This fee is in addition to the Administration Fee of $2.25 per week and investment fees.^

For the 2019/20 financial year, the total annual amount will be charged over a 3-month period from 1 April 2020 to 30 June 2020. From 1 July 2020 the amount will be charged over a full financial year.

For example, if you have an account balance of $50,000, you’ll be charged up to $20 between 1 April 2020 and 30 June 2020 and up to $20 per year from 1 July 2020 onwards.

The new fee does not apply to Choice Income or Transition to Retirement Income accounts.

Why we’re introducing a new fee

Under Protecting Your Super, members with an account balance of less than $6,000 have their administration fees, investment fees and indirect costs capped at 3% pa. This reduces the funds available to cover administration costs, products and services for all members. The new fee will be used to cover this gap in the most sustainable way.

You don’t need to do anything

The fee will automatically apply to your account from 1 April 2020. It will be shown on your 2019/20 Annual Statement.

I don’t have an issue with the redistribution of admin costs to help persons with a “single low balance account” We keep hearing about the cases of people with multiple super accounts and I am less happy to subsidise admin on those accounts. I think the tax office has access to consolidated super data and maybe they can notify funds where there is an account that is low and owned by a person with no other accounts and can notify the holder that with multiple accounts they are not eligible for any special treatment.

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The ATO already flags multiple super accounts and their balances on the ‘customer web site’ and makes the offer to consolidate them.

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