The key to making the most of your Super is to make it work hard, without excessive risks. This might seem obvious when you consider that about $2 out of every $3 we spend in retirement comes from the return on our retirement savings. This means choosing a fund that can deliver the returns you need while avoiding unnecessary fees and taxes. Over long periods, small differences add up. A 1% per annum lower return over the lifetime of your super fund could reduce your retirement income by 30% or mean your savings will run out 7 years earlier. If you are investing for retirement that is 25-30 years away, you typically have more time to ride out the market fluctuations. If you diversify across a range of asset sectors, industries and securities, you'll reduce risk and improve your investment outcomes. 


Fees are important, after all a dollar paid in fees is a dollar not invested in your retirement. Understanding what you will have to pay can be difficult, however it's not your only consideration. 

The formula for how much Super you end up with:

Closing Balance = Starting balance + contributions + returns – fees – taxes

Every element matters. 

Returns and fees are the ones you can control without it affecting your day to day budget. Not getting high enough returns or paying too many fees mean you will need to put more in (so spend less today) to end up with the same retirement income in the future. There are many types of fees, but it's best to focus on the ones you are going to pay regularly (contribution fees, member fees, administration fees and investment management fees). Fees are generally either a flat or fixed fee (so many dollars per week or year) or a percentage of the funds you have invested (asset based fees).

Contribution fees

Paid when you or your employer make a contribution to the fund or rollover your investment from another fund. They are usually a percentage (0-5%) of the amount put in.

Member or Account Fees

Paid periodically and are usually $1-$2 a week. You can save on these by combining your funds into a single fund.

Administration Fees

A percentage of your investment, usually deducted monthly. These usually range from 0.4% to 1.5% annually. Higher fees generally don’t buy better returns; rather they pay for features like greater choice of investment options like choosing individual shares.  If you are going to use these features, know what you are doing and have a sufficiently large investment, then it may be worthwhile paying up.  For most these features will not add real value.

Investment Fees

These are usually a percentage of what you have invested and vary from 0.3% to 2% annually depending on the manager and the type of assets in which you have invested. Cash is the cheapest, followed by bonds and property and then shares. Alternative assets such as hedge funds are the most expensive. Active management (that is a manager that actively chooses which shares or bonds to invest in) costs more than passive or index managers (who buy a bit of everything). Sometimes there will also be a performance fee, when the manager does particularly well. Optimising the fees you pay means taking into account how much you have invested, how much you put in each month, and what it will be invested in. It needs to be tailored to your circumstances.


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