Australians are paying superannuation fees three times more costing $10 billion yearly cut in retirement savings; as a result, Australian lost between one third to a quarter of their retirement savings - this has been found in the recent report from Grattan Institute titled, Super sting: How to Stop Australian paying too much for Superannuation.
"Australians pay far too much for superannuation. They pay about $20 billion in fees and expenses in total. Fund customers pay $1300 on average, every year. These payments to the superannuation industry can and should be reduced by at least half, saving Australians at least $10 billion a year. It is the largest single opportunity for micro-economic reform in the economy," the report argues.
According to the report authored by Grattan Institute Productivity Growth Program Director Jim Minifie, Australians pay fees of 1.2 per cent for account balance for superannuation - this percentage is more than three times the median OECD rate. Conversely, if these fees are to be cut in half, it will give $10 billion back into the retirement accounts.
As recommendations, the report said that there should be low-price default fund for job starter and to use the tax return process for taxpayers to match the new fund.
"These reforms might reduce the revenues of super funds, but more importantly, they will take the nasty sting out of super for most Australians," Mr Minifie wrote.
Superannuation costs too high because of the assumptions that account holders prefer low-price funds, causing for the market to lower their fees to beat competition.
"But this approach has not worked in Australia or anywhere in the world. Superannuation is inherently opaque and most people do not make an informed choice, instead paying into a default fund chosen by their employer."
The report also calculated that even with a timid expectation that a 30-year-old loses more than $250,000, or approximately a quarter his total balance when he retires, a 50-year old will have his superannuation balance reduced by $80,000 in fees for retirement.
Now that total superannuation fees exceed $20 billion in Australia, the report compared that other countries only pay as much as $5 to $6 billion.