By Philippa Billings, Head of Advice, Otivo
Half a percent doesn't sound like a number worth losing sleep over. On a restaurant bill it's a rounding error. Inside super, where it compounds against your balance every year for four decades, it's a different creature entirely — the Productivity Commission found that a 0.5 percentage point difference in fees can cost a typical full-time worker around 12 percent of their retirement balance, roughly $100,000. Here's why fees punch so far above their apparent weight, and the three-question check that tells you where you stand.
Super fees are deducted directly from a member's account balance, typically as a mix of fixed administration fees and percentage-based investment fees. Because the deduction compounds over decades, small differences grow large — the Productivity Commission's 2018 inquiry estimated a 0.5 percentage point fee gap could reduce a typical worker's final balance by about 12 percent. Fee details appear on annual statements and fund websites.
Why do small fee differences become big dollar differences?
Because fees don't just take money — they take that money's future growth as well. A dollar paid in fees at age 30 isn't a one-dollar loss. It's the loss of that dollar plus every year of compound returns it would have earned between now and retirement. Multiply that by every dollar of fees, every year, for 35 or 40 years, and the arithmetic gets serious.
That's the mechanism behind the Productivity Commission's finding. In its 2018 review of the super system, the Commission calculated that an increase in fees of just 0.5 percentage points could cost a typical full-time worker about 12 percent of their balance by retirement — in the order of $100,000. The fee gap itself never looks dramatic on a statement. The compounding does the damage quietly.
What fees does a super account actually charge?
Most accounts charge several fees at once, and they behave differently.
Administration fees cover running the fund. They're often a fixed dollar amount plus a small percentage of the balance, which is why they hit small accounts proportionally hardest.
Investment fees and costs pay for managing the money. They're usually a percentage of the balance and vary with the investment option — options holding more unlisted or actively managed assets tend to cost more.
Transaction costs and buy-sell spreads apply when money moves in or out of investments. They're small individually but real.
Insurance premiums aren't a fee in the strict sense, but they're deducted from the same balance and appear in the same statements, so they belong in any honest reading of what an account costs.
The number that matters is the total — everything deducted in a year, as dollars and as a percentage of the balance. Funds are required to disclose this, and ASIC's MoneySmart explains how to read the fee section of a statement.
The three-question fee check
A useful fee review comes down to three questions, and it starts with the latest annual statement.
- What am I paying in total? Find every deduction — administration, investment, transaction costs — and add them up. Express the total as a percentage of the balance so it can be compared meaningfully.
- What am I getting for it? Fees only tell half the story. A fund's long-term net returns — what's left after fees — matter more than the fee line alone. Higher fees don't automatically buy better performance, and the Productivity Commission found no reliable link between the two.
- How does it compare? ATO online services through myGov include a comparison tool for MySuper products showing fees and net returns side by side, drawn from APRA data. It's a general comparison, not a recommendation, but it shows where an account sits in the field.
Many Australians run this check once a year and find it takes less time than renewing car insurance.
What can someone do about high fees?
Options generally include reviewing the investment option within the existing fund, since fees vary between options, or considering whether the account itself still fits. Any change involves trade-offs — insurance attached to an account, features, and the fund's net performance all belong in the picture, not the fee line alone. Decisions like this depend heavily on individual circumstances, which is exactly the territory where personal advice earns its keep.
Otivo's platform provides licensed personal advice on superannuation under AFSL and Australian Credit Licence No. 485665, including personalised recommendations about investment options based on an individual's circumstances. If you're considering making changes to your super, obtaining personal financial advice can help you understand the potential benefits, costs and trade-offs relevant to your situation.
Frequently asked questions
What is a reasonable fee for super?
There's no single benchmark, because fees vary with account balance, investment option, and fund type. APRA's published data on MySuper products, accessible through the ATO's comparison tool, shows the current range across the market and is the most direct way to see where a particular account sits.
Do higher super fees mean better returns?
Not reliably. The Productivity Commission's system-wide review found no consistent relationship between higher fees and higher net returns. What matters over the long run is the return after fees, which is why net performance is the fairer comparison.
Where do super fees appear?
On the annual member statement, in the fund's product disclosure statement, and on the fund's website. Since fee disclosure rules were standardised, funds must present costs in a comparable format, including a worked example on a $50,000 balance.
Sources
- Productivity Commission — Superannuation, Assessing Efficiency and Competitiveness, 2018. https://www.pc.gov.au/inquiries/completed/superannuation/assessment/report
- ASIC MoneySmart — Super fees. https://moneysmart.gov.au/how-super-works/super-fees
- ATO — YourSuper comparison tool. https://www.ato.gov.au/individuals-and-families/super-for-individuals-and-families/super/choosing-a-super-fund/yoursuper-comparison-tool
Disclaimer
The information in this communication has been prepared by Otivo Pty Ltd ABN 47 602 457 732, AFSL and Australian Credit Licence No. 485665. This content is general information only and has been prepared without taking into account your objectives, financial situation or needs. It is not personal financial or taxation advice and should not be relied on as such. Before acting on any information, you should consider its appropriateness having regard to your personal circumstances. This material must not be reproduced in whole or in part, or posted on any social media platform, without the prior written consent of Otivo Pty Ltd.