Super Fierce Financial Savings Consolidate My Super

Save on super. Upgrade your future.

They say the best things in life are free. But everything else we have to pay for. You already know that, of course. I guess you also think the more you pay, the more you get. Right? In most cases that’s true – we all agree a Lamborghini has a better ride than a Toyota, a penthouse is more luxurious than the average granny flat, and a pair of Kmart sandals likely won’t last the distance of a more expensive pair. But superannuation is a purchase (and a bit of a grudge purchase at that) which breaks the mould.

When you pay more for the management of your superannuation investment, you can’t be sure you’re getting more bang for your buck. Not only do we pay two to three times more for our superannuation than the rest of the world does for comparable products, on average our more expensive funds also deliver less value over the long run.

Higher fees waste an average of $102,000 per person

Superannuation funds love promoting how they are different, better than the others, and how they’re planning to outperform the market. With shiny ads following you wherever you go, and all manner of temptations like frequent flyer points and discounts at The Iconic to lure you in, you can be excused for thinking they might have one up on their competitors. It’s your money, so let’s get under the bonnet and see if they can back their promise of higher returns to validate the higher fees that normally go hand-in-hand.

Spoiler alert:  We’ve done our research and below we lay down the facts that simply do not support the argument of higher fees.

Nerd alert: Numbers don’t lie. And our summary below is based on a combination of government inquiries, independent research, expert calculators and our own analysis, all of which agree.

$100,000. That’s the approximate amount a typical Australian working today could save in unnecessary super fees by the time they reach retirement, simply by moving to a lower fee fund.

$100,000 more in your super at retirement means around 10-15% more income in retirement (based on the average Aussie).

Let’s break that down. $100,000 more at retirement means more spending money…

/ $8,146 more every year
/ $679 more each month
/ $157 more for the week
/ $22 more to spend every day of your retirement

Sounds pretty good, right? But you may be wondering if there’s a catch. We haven’t found one yet. Paying low fees doesn’t mean you have to give up on your personal preferences. There are great ethical and sustainable investment options which are lower cost and still delivering consistent high returns. The same goes for every super investment strategy.

Interested? Want to know your lowest fee fund? (Yep! It’s not the same for everyone). In your personalised Super Savings Report and Statement of Advice, we show you low fee funds in a range of different investment categories giving you the insights so you can choose with confidence. As an example – and we love how often we see our customers making this choice – you can choose a sustainable fund to help get to work on saving the world, at the same time you save on fees.

It’s the ultimate win-win.

The following section is not in small print because we have nothing to hide. No fine print, no BS. We included it because we know there are people out there who love the detail. And you deserve the truth! This is for you.

If math doesn’t light you up, That’s cool. Go forth and be awesome! Just make sure you get your superannuation savings report to see if you can save on fees.

🤓 Nerd alert. The math behind the summary

The math isn’t complicated. But it can be hard to get your head around because most of us don’t have $100,000 in super today, so how can we possibly expect to save that much? This how:

If you have $100,000 in my super today and you go from the Average Fee Fund (1.13%pa + $98pa) to the Lowest Fee Fund (0.06%pa + $108.64pa), you’ll save around $1,000 in that year alone ($1,069.36 to be exact)*

/ That $1,000 saving will grow due to the returns on the fund (performance)

/ Next year, you’ll still have the original $100,000, but you’ll also have the fee savings from this year and the contributions made by your employer. So, your fee savings in the next year will be more than $1,200 for that year ($1,225.11 to be exact)

/ The following year, that savings is nearly $1,500, then $1,900 the following year, and so on and so on. Each year’s savings is higher due to the prior year’s savings compounding each year, plus the contributions you make

/ According to any of the calculators around, you’re likely to have $950,000 by retirement. In that last year before retirement, the savings from fees in that year alone will be around $10,000 (not bad for a simple decision you made decades prior!)

/ Add up 30 years’ worth of savings that go from $1,000 in the first year to $10,000 in the final year, and the total savings very quickly gets to that delicious $100,000 total

*Here we’ve assumed that both of these funds perform the same, but actually the Lowest Fee Fund has historically outperformed the average by quite a large margin.

This is a Super Fierce estimated figure based on:

1. Super Fierce modelling based on external data

Our own modelling building on ABS data for the average super balances and income for women today; average and low fee data from super fund’s own PDSs; economic assumptions including performance, taxation, inflation and wage growth using the same assumptions that ASIC’s MoneySmart website uses in their Retirement Calculator (see more on our modelling below).

2. Productivity Commission

The Federal Government’s Productivity Commission prepared a Inquiry Report into the efficiency and competitiveness of Australia’s superannuation system in 2018. Their conclusions included an estimate of an example “cameo” who started out at 21 years of age on $50,000 income, and found that paying 0.5% more in fees would result in $100,000 less in super (adjusted for inflation) by their retirement. They used 0.5%pa difference in fees as they were demonstrating the impact of going from “high fee” to “average fee”. Nonetheless the conclusion on the magnitude of savings are consistent as we use a higher fee saving per annum, but we use a 37 year old (median contributor) and so there are less compounding years to help savings.

3. External Calculators

Running the same age, balance and income assumptions through two unrelated calculators we found:
/ Super Guide: $94,048 better off with the Low Fee Strategy
/ MoneySmart $60,015 better off with the Low Fee Strategy (MoneySmart has much higher inflation assumption)

4. Super Fierce Modelling

Using median* Australian woman that is contributing to super today (age: 37; balance: $58,729).

/ Fee comparison

Using industry wide average fee paid today is 1.13%pa + $98 fixed fee (source: Productivity Commission)

The 45 funds identified by Super Fierce as Low Fee** have an average fee of 0.25%pa + $82 fixed fee (source: various fund PDSs, Super Fierce analysis)

/ Year 1 difference in fees from switching to a Low Fee fund

For this median Australian woman today, the difference this year is $538.73 (being her balance of $58,729 x Difference between Average Fees and Low Fee, ie 0.88% + $16pa, after tax).

/ Year 2 difference

The following year, after her contributions to her super that year and the fund’s performance (assumed average performance of 7.5% before taxes and fees), her balance is up to $68,618 for the Low Fee fund and $68,163 – the difference being the Year One fee savings.

In Year 2, she saves on fees, but also earns more on the performance of the fund:
/ Fees: $613.81
/ Performance: at the same performance assumption of 7.5%pa pre-fees and taxes, the Low Fee fund performance will add $6,103.68 while the Average Fund will add $5,579.58. This is not due to better performance, but rather from the same performance applied to the $538.73 from the first year’s fee savings. So its actually the Compounding Fee Savings Impact
/ That is, the Low Fee benefit is $31.75 from the extra earnings from the first year’s interest + $613.81 from fee savings in the second year for a total of $645.56

/ Compounding Fee Savings Impact

Each year the fee savings add to her balance, and the performance of the fund has more balance to work with, so it adds more earnings each year.

/ By year 10 (when she is 47), her balance will be around $200,000. In the Low Fee Strategy, her balance will be $210,020, which is $11,013 more than the Average Fee Strategy.
/ In that year, fee savings are $1,497.27 and Compounding Fee Savings Impact (extra performance from fees saved) is $630.60 for a total of $2,127.87 total impact of the Low Fee Strategy in that year

/ By the time she is 60, her balance will be around $650,000, and the Compounding Fee Savings Impact has overtaken the Fees Impact
/ The gap has now opened to around $76,000 (Low Fee Strategy: $692,931 vs Average Fee Strategy: $617,189)
/ Fee savings in that year are $4,491.66 and Compounding Fee Savings Impact is $4,668.25 for a total impact in that year alone of $9,159.91

/ By the time she is 67, her balance will be around $1.1m (Low Fee Strategy: $1.21m vs Average Fee Strategy: $1.05m)
/ The difference due to lower fees is now $169,378
/ In “today’s dollars”, that is the same as $102,148. In other words, $169,378 more in her super by her 67th birthday will buy the same as $102,148 would today.

/ Low Fee funds are defined by Super Fierce as being the lowest fee for a given investment strategy such as:
/ Balanced (which most Australians are invested in)
/ High Growth (riskier and therefore more likely to have higher performance)
/ Conservative (lower risk and therefore lower returns are likely)
/ Sustainable (positively supporting climate change, equality, socially responsible companies and assets; and avoiding those that defy these causes)
/ Indexed (uses ETFs or other passive strategies that don’t employ active fund managers that are paid to outperform the market)

General information only

Finance topics we discuss in our videos, on our website and in other marketing material is general in nature. It doesn’t take into account your personal circumstances, your financial situation or your specific needs. You should consider seeking independent legal, financial, taxation or other advice to check how this information relates to your unique circumstances.
Super Fierce Pty Ltd (ABN 22 632 423 575) is the holder of Australian Financial Services Licence (AFSL no. 534567).

Not only do Aussies pay two to three times more for our superannuation than the rest of the world does, on average our more expensive funds also deliver less long term value.

Saving on super fees doesn’t mean you have to give up on your personal preferences. Want an ethical and sustainable investment option? Some are lower cost and deliver consistent high returns. The same goes for every super investment strategy.

The math isn’t complicated. But it can be hard to get your head around because most of us don’t have $100,000 in super today. But listen up while we break it down.

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