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’.
For those of you who love all the details (like us) you can view ASIC’s regulatory guidance here. Or for those of you who’d rather have 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 enforce 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). Verve 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 actually 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 (scroll down and you’ll find the link to ours!)
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” and
- “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 – and
- Costs – generally taken from the calculation of the investment return before it is paid into your account.
- Indirect costs are no longer shown as a stand-alone line item, and are instead provided as itemised costs under the headings of ‘Administration Fees and Costs’ and ‘Investment Fees and Costs’.
- Transaction costs, which relate to the buying and selling of investments, were previously captured in investment fees and costs but are now shown separately.
- 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 Verve Super?
We continue to be 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 Verve Super account.
For example, for a superannuation balance of $50,000, prior to 30 September 2022, you’d expect to pay approximately $653.50 per year in fees for holding a Verve Super account. With the same balance, from 30 September 2022, the expected annual fees are $663.00. 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 Verve Superannuation Pty Ltd directly. The changes from 30 September 2022, also mean that we are required to display third-party costs (which are paid by Verve Superannuation Pty Ltd) 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 costs to members of the Fund.
You can compare for yourself using the example balance tables below. Please refer our PDS for more detailed information.
Example of annual Verve Super fees and costs before 30 September, 2022
*Additional fees may apply
Example of annual Verve Super fees and costs from 30 September, 2022
* What it actually costs will depend on your account balance.
^ You will not be charged the $60 p.a. fee if your account balance is under $5,000. For more information, see the ‘Additional explanation of fees and costs’ in the Additional Information Booklet available from www.vervesuper.com.au
Note: Additional fees may apply. and if you leave the superannuation entity, you may be charged a buy-sell spread which also applies whenever you make a contribution, exit, or rollover. The buy-sell spread for exiting is 0.070% (this will equal $35 for every $50,000 you withdraw).
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, as well as your insurance needs. You may also like to consider if your super is invested in alignment with your values. And take a look at 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.
Learn more —
- What is superannuation? Everything you need to know about super
- 7 Steps to superwoman status – how to sort your super
- How to judge your super fund’s performance
This blog is published by Verve Superannuation Pty Ltd (ABN 65 628 675 169, AFS Representative No. 001268903), which is a Corporate Authorised Representative of True Oak Investments Ltd (ABN 81 002 558 956, AFSL 238184), as the Sub-Promoter of Verve Super.
Verve Superannuation Pty Ltd and True Oak Investments Ltd are not licensed to provide personal financial advice. The information contained in this blog, including any financial guidance, is general in nature. You should consider seeking independent legal, financial, taxation or other advice to ensure that your financial decisions are suited to your unique circumstances.
Interests in Verve Super are issued by Diversa Trustees Limited (ABN 49 006 421 638; AFSL 235153; RSE Licence L0000635) as trustee of the Future Super Fund (ABN 45 960 194 277; RSE Registration R1072914). Verve Super is a sub-plan of the Fund. You should read the Product Disclosure Statement, Additional Information Booklet, Insurance Guide, Target Market Determination and Financial Services Guide before making a decision to acquire, hold or continue to hold an interest in Verve Super. When considering financial returns, past performance is not indicative of future performance.