Super fees still a bargain for APS and Defence Force members, despite 40% increase

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The Commonwealth Superannuation Corporation has increased administration fees for members of the Public Sector Superannuation Accumulation Plan (PSSap) and ADF Super funds, but only by about $2 a month.

While the increase is 40% as reported in this morning’s news, the new fees will add up to no more than $84 a year. CSC’s fees are well below the industry average and it notes the nation’s largest fund, AustralianSuper, now charges $117 a year. Both are run on a profit-for-customers basis.

“We haven’t made any changes to our PSSap administration fee for over four years, and we haven’t changed the ADF Super administration fee since inception of the fund,” CSC explains on its website.

“During that time, the costs involved with managing those funds (in the case of PSSap, one of the largest superannuation funds in the country) have increased.”

The reason for the increase is new legislation that takes effect from July, abolishing “exit fees” and capping the administrative fees that super funds can charge members with less than $6000 in their accounts, at 3% of their balance.

Another consequence is that funds will have to hand over the contents of inactive accounts to the Australian Taxation Office, so these savings can hopefully be given back to their rightful owners, who may have lost track of them. There are about 7000 of those on CSC’s books. That also means there is less money in the funds in total, increasing the cost of administration per active member.

“Because of these significant changes and other increased operating costs, we had to review our fee structure and make the tough decision to increase our administration fee,” says the CSC website.

But it’s not just the new legislation, members are advised.

“Over the past four years, CSC has seen significant increases in operating costs, including compliance and governance costs associated with regulatory and tax changes; technology infrastructure and security costs; and we have made significant and ongoing investments in improving customer services. All of these factors have contributed to the increase in our annual administration fee.

“All of these business costs go towards ensuring we are meeting our obligations as a registered financial services provider, and so that our customers get the services and information they need and the retirement outcomes they want.”

One frequently asked question on the CSC website suggests the tiny fee increase seems to fly in the face of the intention of the legislation, given it’s called the Protecting Your Super Act and is supposed to protect people from having their retirement savings whittled away by admin charges.

“Absolutely not,” is the government-owned corporation’s answer. The legislation mainly protects inactive accounts with especially low balances that are not receiving any new contributions.

“An account with a balance under $6,000 that has been inactive for 16 months will be transferred to the ATO where that money will be held or consolidated into a customer’s active super account.

“This protection is in place for all customers of accumulation funds and is a universal safety net, regardless of the administration fee charged by a super fund.”

It’s hardly a revelation, but members of PSSap and ADF Super are still getting a great deal compared to most private-sector employees.

“CSC charges a set dollar administration fee and no investment fee for PSSap and ADF Super, so if our $84 annual administration fee plus indirect costs ratio is greater than 3% of an account’s balance at the end of the financial year (or when you close your account) then CSC will refund the difference.

“To put our administration fee into perspective, for a customer who has an average balance of $100,000 in their account over a year, the new $84 annual administration fee represents a cost equivalent of 0.084% of that balance.”

The CSC website’s FAQ section contains comprehensive details about what it charges and why.