The $28 billion AustralianSuper increased its administration fee from $1 to $1.50 per week from January 1, 2009, while the $2.75 billion Westscheme is raising its administration fee from $1.25 to $1.50 per week from July 1 this year. Ian Silk, chief executive officer of AustralianSuper, stresses the fee hike is not a knee-jerk reaction to the current investment environment. The percentage increase looks significant on the back of a very low starting point, he adds. “The core administration fee of the fund hadn’t moved for 20 years since the fund was established, so in real terms, adjusting for inflation, the fee had dramatically reduced and the breadth and quality of services that we provided had increased exponentially,” Silk says.
“It got to the point where there was a looming mismatch between our costs on the one hand and the fees we were charging on the other, so we increased it. The most important thing is that we are committed to our fees matching our costs, and that’s not an approach that’s universal throughout the industry.” In its March newsletter to members, Westscheme said the 25 basis point increase would allow it to meet the increasing costs of super regulation and services to members and employers.
For those who have been members for five years or more, the fee reduces to $1.40 per week, and those who have been members for 10 years or more pay just $1.30. Where’s th e fat ? It is fair to assume that many more funds will be forced to raise their fees in 2009, potentially pushing the average super account fee even higher. So how then can the industry realise Sherry’s aim to cut the average super fee by around 20 per cent? Is this a realistic goal given the tougher market environment, and if so, where is the ‘fat’? Each segment of the industry has a different view on where the fat lies within super fees, but one thing is clear; if the target has any hope of being achieved, the industry is going to have to work together.
Jeff Bresnahan, managing director of SuperRatings, says the fat is in the investment fees and salaries paid to funds managers. He says the superannuation “pie”, which includes mainstream costs such as administration, investment, insurance, auditing and asset consulting, is finite, and is currently sliced the wrong way. “That’s impacting on administration and asset consulting services, which traditionally have been dollar-based costs and basically have been underfunded, restricting future development,” he says. “Trustees have screwed administrators and asset consultants down every time… the investment managers have gotten away, up until 2007, with a 100 per cent increase in revenue without doing any additional work.”