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APRA report on super returns and fees shows that cheaper funds are usually a better option.



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SENATOR NICK SHERRY

SHADOW MINISTER FOR RETIREMENT INCOMES AND SAVINGS, CONSUMER AFFAIRS

MEDIA RELEASE 5 February 2003

APRA report on super returns and fees shows that cheaper funds are usually a better option

Research released today by the Government’s own superannuation regulator, Australian Prudential Regulation Authority (APRA), has revealed that the most expensive superannuation funds are also the worst performing.

APRA confirmed that returns to super fund members are lowest where fees are highest.

Retail (for profit) superannuation funds on average were the most expensive funds over the past seven years with the lowest returns. In APRA’s words this indicates these funds are potentially “not acting appropriately in the member interest”.

These expense figures do not include adviser commissions which can increase the overall costs in retail (for profit) funds significantly, usually by 0.5% to 2%.

This research confirms what most people already knew as a rule of thumb in super - the more fees you pay, the less you will have to retire on. A 1% or 2% annual fee reduces the final retirement nest egg by 22% and 40% respectively.

APRA has delivered a stern warning to the Liberal Government that without Labor’s plan for strong protections, their so-called choice (deregulation) bill will be bad news for nine million Australians with superannuation.

Higher cost, lower return retails funds are the funds commission agents will recommend to Australians when so-called choice is introduced.

Without Labor’s plan to cap fees and ensure they are fully disclosed, many consumers will be lured into funds with higher fees and lower returns.

The so-called choice bill should not proceed without Labor’s strong consumer protections.

For more information or comment please contact: Senator Nick Sherry 0418 482807 or Amber Saggers (02) 6277 3128 or 0411 103961