Fees, fund performance and future — the three ‘effs’ to give when choosing a super fund
For many of us, our super is the biggest investment we will ever have. It represents both a pot of savings for our future self and (for better or worse) for the future of our planet. However, when it comes to choosing the right super fund for you, things can get pretty confusing, fast.
When you’re trying to weigh up what to give an ‘eff’ about — it can be hard to sort the ethical wood from the micro-plastic trees. But the absolute last thing we want is for you to put super in the ‘too hard’ basket.
As an organisation on a mission to level the financial playing field and close the retirement gap for women+, we want to support you to level up your financial know-how, so you can make informed choices and feel more confident about your financial future.
So, let’s unpack some of the biggest ‘effs’ to give when choosing a super fund — fees, fund performance, and what kind of future you want to invest in, and how to harness the power of ethical investing to build long-term wealth in line with your goals and values.
First, let’s flex your [super] power
Maybe someone hasn’t told you yet today, but you are pretty powerful. As individuals, and as a collective, we already hold an immense capacity to create seismic waves of change and flip our entire economic system on its head. One way we can do that (and are already doing that) is through our superannuation. So, it’s crucial that we take more than a casual interest in where it’s invested. Why?
One reason is that, in our current economic system, money buys power. And as it stands, that power is overwhelmingly not in the hands of everyday people. In fact, the richest 1% controls half of the world’s wealth. And money all over the world is often used in a way that is wrecking our planet and robbing our future. With growing inequality in many parts of the world, this is extremely problematic.
Right now, Australia’s superannuation system is the fourth largest in the world, representing over $3 trillion. No matter what language you speak, that’s a lot of moolah.
As individuals, and as a collective, our super is a significant financial asset, and each of us has a choice to invest it for the kind of future we want to be part of — not just for ourselves, but for the planet. But how to choose? Let’s dive into the three ‘effs’ to give when choosing a super fund that’s right for you: fees, fund performance, and the future.
#1. Fees →
Why we need to look at total fees and what they *actually* cover
When it comes to super, every fund charges its members what’s called an ‘administration fee’. This fee covers the general cost of managing your super account and usually covers things like their call centre service and the cost of issuing annual statements. It can be charged as a fixed fee, as a percentage of your account balance, or as a combination of both. And while a lot of super funds might promote that they have ‘low admin fees’, it’s important to see the bigger picture and take into account the total fees across the board. So, what other types of fees are there?
→ There is what’s called ‘investment fees and costs,’ which essentially covers the costs of managing your investments, including transaction costs when assets are bought and sold.
→ There are sometimes ‘performance fees’ if an investment manager’s returns are above (or below) an agreed amount. Typically, these are not charged to you directly but they are deducted from (or added to) your returns.
→ There are sometimes ‘activity fees’ and ‘insurance fees’, if you have insurance cover through your super fund.
→ Fancy-sounding things like the ‘buy-sell spread fee’, which essentially covers the difference between the price you buy and sell your ‘units’ of the fund.
According to Canstar, on average, people pay between 0.91% and 1.21% of their account balance in fees per year. And you can rest assured that, if your account balance is less than $6,000 at the end of the financial year, certain fees and costs are capped at 3% of the account balance.
So, where does Verve Super sit?
At Verve, we have a dollar-based administration fee of $1.15 a week, which adds up to a set annual amount of $60 a year, deducted from your account. Then, we also charge a percentage-based administration fee, which has recently lowered to 0.541% p.a, and investment fees and costs of 0.300% p.a.+ 0.067% p.a. = 0.908%
Translated into dollar terms, this means that for every $50,000 you have invested in Verve Super, you are charged $270.50 in administration fees and costs (deducted from your account), plus $60 a year, regardless of your balance. You are also charged $183.50 in investment fees and costs (also deducted from your account). So, if your balance was $50,000 at the beginning of the year, then your total fees and costs for the year would add up to $514.00, plus a small buy-sell spread fee of 0.070%
According to the latest Choice Product Heatmap by the Australian Prudential Regulation Authority or ‘APRA,’ Verve Super’s total fees are inline with the median fees for comparable products. Sure, there are cheaper funds out there, but cheaper isn’t always better.
The way we see it — it’s not just about how much it ‘costs’ in raw figures to be with a certain super fund, just like it’s not only about what that piece of gorgeous upcycled furniture costs, or that colourful reusable water bottle.
Perhaps the most important considerations when you’re weighing up a super fund’s fees are:
- What are the total fees — be sure to add up admin, insurance, investment fees etc., don’t just compare admin fees with admin fees because it might not be representative of the whole picture. The easiest way to do that is to download the PDS and check out the Fees and Costs example table across products.
- Figure out what you get for those fees — for example: Verve Super members also get access to an epic ‘Support Squad‘ with career coaches, financial advisers, and divorce and separation coaches, as well as local, all women member support, and financial literacy resources. So, take a look around their websites or give them a call and ask!
It’s also worth bearing in mind that, just like all organisations, super funds can achieve fee savings through scale. As funds like Verve Super continue to grow, it’s exciting to think about how that might impact fees into the future.
And finally…when we’re thinking about fees, it’s important to keep in mind: ‘what are the returns?’, which brings us to the second ‘eff’ to give when choosing the super fund is right for you: fund performance.
#2. Fund performance →
Putting fees into a value-based context
When you’re looking around, trying to find the right super fund — there is a lot to factor in. We’ve talked about fees, and how it’s important to take into account not only admin fees, but total fees, and what we are ‘getting’ in exchange for those fees. Now let’s put those fees into perspective with the second ‘eff’ to give: fund performance.
“Fees are not clearly correlated with value for money and any assessment of a superannuation fund should be made using a broad range of criteria, with ‘net benefit’ (investment returns less all fees and taxes) being a meaningful basis for comparison of fees and investment performance. Of course, when measuring overall value, consideration must also be given to broader issues including member services, administration capabilities, governance and insurance offerings, all of which can affect retirement outcomes.” — Kirby Rappell, Executive Director, SuperRatings
One handy way to learn more about fund performance is to dive back into the APRA Superannuation Heatmap. Designed to increase the transparency and scrutiny of super fund performance, this tool uses a graduating colour scheme to provide clear and simple insights into three areas: investment pathways, fees and costs, and sustainability of member outcomes. There is also an online, interactive, web-based tool to help users explore the data more easily.
While these tools are an important piece of the regulatory puzzle, you might start to notice that ethically invested super funds often have higher total fees compared to others. This is largely due to something called ‘screening’ — a way of weeding out investments that don’t align with a set of values, and proactively seeking ones that do.
In Verve Super’s case, think: no direct investment in fossil fuels, gambling, weapons, live animal exports, and seeking investments that lead the way in: gender equity, carbon efficiency, and sustainability.
As you can imagine, the screening process takes longer than just investing in any old thing. It also costs a little more. And that’s where it’s so important to put fees in a value-based context and assess what additional value you are getting when investing your super ethically.
In addition to rigorous ‘positive and negative screens’, Verve Super offers a unique managed fund with hundreds of investments, including alternative impact investments not listed on the Australian Stock Exchange. For example, Verve members are invested in The Artesian Green and Sustainable Bond Fund, a leader in both carbon efficiency and gender equity. 100 per cent of their fund holdings have women on the board, and 85 per cent have more than one woman on the board. Find out exactly where your money is invested with Verve Super by taking a trip around our Investment Universe ↗
The last thing we want to say about putting fees in a value-based context is that research conducted by the Responsible Investment Association of Australia (RIIA), shows that, over the long run, well-screened ‘ethical products’ do tend to outperform the rest of the market. So, while this screening has a cost, it can also have a financial benefit, and create a win-win for people and the planet. Of course, past performance may not be a reliable indicator of future returns, but it counts for something.
We’ve talked fees, we’ve talked fund performance — ready for that final ‘eff’ to give? Let’s talk about the future.
#3. Future →
Figure out what’s it worth to you to invest for good
With the Superannuation Guarantee continuing to go up, our super is becoming more and more of a significant financial asset year on year. And as we’ve pointed out, each of us has a choice to invest it for the kind of future we want to be part of — not just for ourselves, but for the planet, and for future generations.
While it can be common to feel powerless in the face of great global challenges like climate change, the reality is that women in Australia already control over $1.2 trillion in wealth through their superannuation and other assets. Did you know that’s more than enough to fund the entire transition of Australia’s economy away from fossil fuels to renewables by 2050, many times over? Now that’s the kind of future we want to be part of.
It’s becoming more accessible than ever before to align our decisions, choices and behaviours with our personal values and support positive change for people, communities and the planet. And that means caring about where our super is invested. In fact, switching your super to an ethical fund like Verve is one of the most powerful climate actions you can take. So, don’t let anyone convince you that where you invest your super doesn’t matter — it matters, a lot.
One final ‘eff’ → food for thought
Women in Australia are currently retiring with an average of 23% less in retirement savings than men. When we started Verve Super back in 2018, that gap was at 35%. We are also seeing thousands of older Australian women retiring in poverty, and experiencing homelessness after a lifetime of caring for others.
Verve was founded because we saw a gap for ethical, trustworthy, and supportive financial services with a gendered lens, and the opportunity for women+ to invest in a more compassionate, sustainable, and fairer future for all.
We know it’s not enough for individuals to succeed. Instead, we must channel every collective ‘eff’ and flex our [super] powers for the good of all people and the planet. Together, we can redefine what ‘wealth’ and economic success looks like, and build a more just, inclusive, and equitable world for all.
Find out more about how Verve Super is advocating for systemic change and schedule a call with our friendly member services team who can help you switch your super in the time it takes to make a cuppa ↗