Super fees likely to decline

Superannuation fees are continuing to grow in dollar terms, according to new industry commentary by Rice Warner, and they appear large in dollar terms at $22 billion.

But that figure should be put into perspective, said Rice Warner.

"The total is less than the total profits of the big four banks ($30 billion); all the while running an industry with assets that are more than five times the size of those same banks and more than 1.25 times the GDP of Australia," said the consultant.

Rice Warner acknowledged the superannuation system is "clearly" too expensive in some areas, as has been suggested by the Financial System Inquiry and the Productivity Commission.

However, the actuary pointed out that Australia's superannuation industry is more expensive than other systems because it includes extra member services, including member choice to select their own fund, choice of investment strategy, universal life insurance, flexible retirement products and intra-fund advice.

There have also been been factors driving up fees, not limited to extra compliance requirements and technological changes.

However, despite the structural factors in Australia, fees have decreased from 1.26 per cent in 2006 to 1.03 per cent in 2016, said Rice Warner.

"We anticipate fee levels falling despite a likely continuing growth in member services," Rice Warner said.

"In 10 years, our largest fund will have $250 billion. With enhanced technology, could it operate for 45bps? That is, $1.125 billion. Could that fund get down to 30bps, which is still $750 million?"