Superannuation is central to Australia’s retirement system. With more than $3.9 trillion in assets under management as of March 2025, superannuation funds play a critical role in providing financial security for millions of Australians. But while the system has grown into one of the largest retirement savings pools in the world, many Australians are losing a significant portion of their retirement nest eggs to fees.
High superannuation fees remain one of the most overlooked threats to long-term wealth creation. Even small percentage differences can compound over decades into losses of hundreds of thousands of dollars. Understanding how these fees work, who benefits from them, and how to reduce their impact is essential for both current retirees and younger Australians planning for retirement.
Why Superannuation Fees Matter
When Australians think about retirement, they usually focus on how much money they’re contributing or what their employer is adding to their account. Far fewer consider the fees quietly draining their balances every year.
Superannuation fees are typically charged in several forms:
- Administration fees – flat or percentage-based fees charged to cover fund operations.
- Investment fees – charged for managing investment portfolios, including costs for active management and underlying fund expenses.
- Performance fees – additional fees when fund managers outperform benchmarks.
- Advice fees – ongoing or one-off costs for financial advice attached to super funds.
The Productivity Commission has warned that Australians are paying more than necessary in fees, with some funds charging more than twice as much as others for comparable performance. Over a lifetime, these costs can make the difference between a comfortable and a modest retirement.
How High Are Superannuation Fees in Australia?
The scale of fees in the system is striking.
- According to the Australian Prudential Regulation Authority (APRA), Australians paid around $34 billion in superannuation fees in 2022–23, representing about 1% of total assets under management.
- The Productivity Commission previously estimated that the average Australian pays about $850 per year in fees, although this varies by fund and account balance.
- Research by Rainmaker Information shows that the average annual super fee is about 1.1% of assets, while the best-performing low-cost funds charge between 0.5% and 0.7%.
That 0.4–0.6 percentage point difference may sound small. But over a 40-year working life, it can erode retirement savings by over $200,000 for a worker on average wages contributing steadily to super.
The Long-Term Impact of Fees
Superannuation is a long-term investment vehicle, which means compounding plays a massive role. Just as compounding works in your favour when returns are reinvested, it works against you when fees are deducted every year.
Consider this example:
- Worker A and Worker B both start with $0 in super and contribute $10,000 annually over 40 years.
- Worker A’s fund charges 0.7% annually in fees. Worker B’s fund charges 1.2%.
- Assuming identical investment returns of 7% before fees, Worker A retires with about $2.02 million, while Worker B retires with about $1.74 million.
The higher-fee fund has effectively cost Worker B $280,000—enough to significantly reduce retirement lifestyle.
Why Are Fees So High?
Several factors explain why superannuation fees in Australia remain relatively high compared to other OECD countries:
- Active management costs – Many funds rely on active managers rather than low-cost index tracking, leading to higher investment fees.
- Multiple accounts – Australians who have more than one super fund often pay duplicate administration fees. The Australian Taxation Office (ATO) estimates there are still millions of unintended duplicate accounts.
- Vertical integration – Some large financial institutions own both the fund and advice channels, incentivising higher charges and commissions.
- Legacy products – Older, poorly performing funds often continue to charge higher fees, trapping members who don’t switch.
While reforms such as MySuper and the Your Future, Your Super performance test have placed downward pressure on fees, many Australians remain in high-cost funds unnecessarily.
Who Benefits From High Fees?
The clear winners from high fees are superannuation providers and investment managers. Every additional 0.1% fee across trillions in assets translates into billions of dollars in revenue.
For example:
- A 1% fee on Australia’s $3.9 trillion pool equates to $39 billion per year in revenue for fund managers and administrators.
- These revenues fund large salaries for executives, marketing campaigns, and complex investment strategies that don’t always outperform cheaper index-based alternatives.
In contrast, the people who lose are fund members—the very Australians the system is supposed to serve.
Practical Steps to Reduce Superannuation Fees
Fortunately, Australians are not powerless in the face of high fees. There are practical steps individuals can take to protect their retirement savings:
1. Consolidate Super Accounts
If you have multiple super accounts, you are almost certainly paying duplicate administration fees. The ATO provides tools through MyGov to help consolidate funds into one account.
2. Compare Fund Fees and Performance
Websites such as APRA’s MySuper Heatmap and SuperRatings allow Australians to compare how much they are paying in fees relative to fund performance. Switching to a lower-cost fund can save thousands each year.
3. Favour Low-Cost Index Options
Index funds consistently deliver competitive returns at far lower costs. Many industry funds now offer index-based investment options with total fees below 0.6%.
4. Review Regularly
Even if your current fund is competitive, fees and performance can change. A quick annual review ensures you are not drifting into higher-cost structures.
5. Seek Independent Financial Advice
A financial planner can assess whether your fund is competitive and aligned with your retirement goals. Importantly, fee-only advisors—who charge transparent fees rather than commissions—
The Importance of Financial Advice in Managing Super Costs
The complexity of superannuation makes financial advice critical. But not all advice is equal.
Historically, commission-based advisors had incentives to recommend higher-fee funds or products that paid them trailing commissions. This created conflicts of interest, leading to the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (2018), which revealed systemic issues of poor advice and excessive fees.
A fee-only financial advisor—who charges clients directly for advice rather than receiving commissions—offers several advantages:
- Transparency – You know exactly what you are paying and why.
- Alignment – Recommendations are less likely to be influenced by hidden incentives.
- Cost savings – Advisors focused on reducing unnecessary fees often save clients far more than the advice costs.
For retirees, working with a fee-only planner can be particularly valuable, as it ensures retirement income streams are maximised rather than eroded by hidden charges.
Recommendations for Retirees and Future Retirees
For Future Retirees (Working Age)
- Consolidate super into a single, competitive fund as early as possible.
- Consider low-cost index-based investment strategies.
- Regularly review your fund’s fees against benchmarks.
- Engage a fee-only advisor to ensure your fund remains cost-effective.
For Retirees
- Review whether your retirement income streams (such as account-based pensions) are being eroded by high fees.
- Assess whether switching to lower-fee pension products could improve sustainability of income.
- Work with a financial planner to ensure drawdowns are optimised without unnecessary costs.
Common Pitfalls to Avoid
- Inertia – Staying in a high-fee fund simply because switching feels complicated.
- Assuming high fees equal better performance – Evidence consistently shows that low-fee funds often outperform over time.
- Relying on conflicted advice – Commission-based advisors may not act in your best interests.
- Overlooking small fee differences – Even 0.3% extra in fees compounds to six figures over a lifetime.
Conclusion
Australians cannot afford to ignore the impact of superannuation fees. With billions of dollars lost annually to excessive charges, the difference between a comfortable and modest retirement often comes down to choosing the right fund and seeking the right advice.
By consolidating accounts, comparing options, favouring low-cost funds, and working with a transparent fee-only financial advisor, Australians can protect their retirement savings and maximise the benefits of one of the world’s strongest superannuation systems.
The message is simple: every fraction of a percent matters. Over decades, lowering your fees can translate into a significantly better retirement.
REFERENCES
Here’s the full citation list in plain text for easy copying:
- Australian Prudential Regulation Authority (APRA), Quarterly Superannuation Statistics, March 2025.
- Productivity Commission, Superannuation: Assessing Efficiency and Competitiveness, Inquiry Report, 2019.
- Australian Securities and Investments Commission (ASIC), Moneysmart: Super Fees and Costs, 2023.
- Rainmaker Information, Superannuation Benchmarking Report, 2023.
- Australian Taxation Office (ATO), Super Accounts Data Overview, 2023.
- Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, Final Report, 2019.
- SuperRatings, Super Fund Fee Comparisons, 2024.
- APRA, MySuper Heatmap, 2024.
