Super fees tipped to fall, but bank profits still holding up

The peak body of super fund managers says fees and charges on superannuation funds will fall below the current level of 1.25% of funds under management as a result of savage competition.

The peak body of super fund managers says fees and charges on superannuation funds will fall below the current level of 1.25% of funds under management as a result of savage competition.

The prediction was made by the head of the Investment and Financial Services Association, Richard Gilbert, in response to a review of the super system by Federal Superannuation and Corporate Law Minister Nick Sherry.

Sherry wants to see the cost structure of the industry changed and is believed to be keen for fees to fall below 1% of funds under management.

“There will be reductions in fees,” Gilbert told The Australian Financial Review. “The competition is savage. It might get down to 100 or 110 basis points (1% to 1.1%).”

But Gilbert says comparisons with international superannuation systems suggest that it is unlikely that super fees will get below 1%.

Still, the news provides a glimmer of hope for Australian super fund members, many of whom will receive statements this week telling them they suffered negative returns last year.

According to research firm SuperRatings, the average balanced fund fell 6.4% last year and the sharp fall in global equity markets in July suggest this financial year has not started well for super funds.

Meanwhile, a survey by research firm InfoChoice has revealed bank profit margins have actually increased by 30% in the last six months, despite the impact of the credit crunch.

According to The Australian, InfoChoice found that bank profit margins rose from 1.35% in January to 1.8% in July.

InfoChoice also found the big four banks – Commonwealth, ANZ, NAB and Westpac – increased their market shares 59% to 60% over the same period.

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