Is your superannuation fund working for you, or for your insurance fund/bank/financial planner? You be the judge.

With most services there is a fixed price and we decide if we are willing to pay that price. We can make a decision between a bulk billed medical centre if we are not happy to pay the fee for our regular doctor. We don’t have to buy a coffee if we think the price is too high.

In your superannuation fund however you never know what you are paying because it is paid on a percentage of your investment balance regardless of the results achieved by that manager.

The biggest issue here is that the fees grow with your superannuation balance.

If your superannuation fund (based on a $200,000 balance) sent you an invoice every single month for $330 and increased it by 10% every year without advising or discussing it with you , would you pay it?

Probably not or at the very least you would begin to ask some questions about what was being done to earn that fee. Considering many fund just invest in the top 50 stocks there is just not that much service.

YOU ARE PAYING THOSE FEES, BUT YOU JUST DON’T KNOW IT AND YOUR SUPERANNUATION FUND IS NOT GOING TO EXPLAIN IT IN SUCH TERMS.

Your retail super fund is charging you 1% to 2 % of the balance in your super fund and has no relation to the returns earned. So $200,000 will earn them $4,000.00 regardless if your fund lost 30% that year or made 30%.( That’s why they have no incentive to look for better returns for you). Now if you have a salary of $60,000 your employer will put $5,550 into your super , but the manager will take $110.00 of that and if the fund earns 10% the manager will pick up another $400.00.

So in one year on a $200,000 investment invested in a passive fund the retail manager can “earn”4,510.00 in fees or 22% of the fund earnings in a good year. It could be 100% of earnings in a poor year.

If you have $500,000 balance the fees could be $11,000 – $12,000 and the manager will have done not a single bit more work on your behalf except to use bigger numbers.

Where is the justification for that fee?

If given the choice would you pay $1,000.00 per month for a service that returned you any thing from a negative return to an average 8% return.

Essentially in most years the retail manager is taking between 30% and 100% of the earnings of your fund. that’s your retirement going into their pockets.

WHAT IS THE ALTERNATIVE?

Ask Your FORSYTHS accountant to arrange an appointment with one of their professional partners. You can arrange a fixed fee for service so you know what the fee will be and can monitor the fees v returns on your superannuation fund.

A fixed fee for a Self Managed Super Fund will mean that you won’t pay extra as your fund grows in value.

You won’t pay extra just because your employer added some of your salary to the super fund and you won’t pay extra if you earn 30%.

And that’s if you just invested in the top 50 companies the same as is likely the case with your existing superannuation fund.