Younger Australians are more at risk of super switching, raising fresh concerns about switching incentive effects, advice fee levels and super erosion risks in parts of the super system with weaker oversights.
The Super Members Council said there has been a $1.1 billion surge over the last two years in advice fees deducted from Australians’ super accounts which aligns with a sharp spike in recent super switching, and younger Australians who switch into an SMSF face even bigger costs which can erode their super at a key life stage and make them significantly poorer now and in retirement.
The council said new analysis said for someone with less than $100,000 in super, SMSF operating costs are between 18-40 times higher than if they stay in a MySuper product in an APRA-regulated super fund and the costs become broadly comparable at super balances approaching $2 million.
Misha Schubert, chief executive of the Super Members Council, said switching risks can be very significant for younger Australians with a modest amount of super, because higher fees can seriously eat away at their retirement savings at a pivotal stage for their super.
The new analysis of APRA and ATO data features in the council’s submission to the Government’s consultation on a raft of consumer protection reforms following the Shield and First Guardian collapses.
It shows total advice fees deducted from Australians’ super accounts suddenly spiked in the last two years and just five super platforms accounted for $815 million of the sudden $1.1 billion fee surge from 2023 and 2025.
The growth rate in advice fees nearly tripled in pace in this period, highlighting an urgent need for stronger consumer protections including more universally robust trustee oversights, clearer fee transparency, and global advice fee caps to ensure all fees deducted from Australians’ super are always reasonable and proportionate.
The council said many of the Australians now being switched into these products are those least able to absorb higher costs especially younger Australians with low and modest amounts of super who are still building their retirement savings.
Across SMSFs and super platforms, the majority of more recent super switchers had super balances below $100,000 or $200,000 – a departure from the long-term profile of older, wealthier investors for whom these types of more complex super products are typically designed.
The council’s analysis of SMSFs highlights further risks, with many low-balance Australians moving into structures with significantly higher costs and weaker long-term returns compared to APRA-regulated funds.
It found that Australians with super balances under $100,000 face average total SMSF expenses of nearly 12 per cent a year, versus costs of under 0.5 per cent in profit-to-member funds.
Additionally, over the past decade, SMSFs with $100,000 or less delivered average annual investment returns of -9.5 per cent, compared to +7.0 per cent for profit-to-member funds.
The council is calling for urgent reforms to strengthen consumer protections across the super system, including a wanting mechanism and minimum balance threshold for SMSFs, stronger caps and universally robust oversights on advice fee deductions, and stronger transparency and reporting of fees across all products.
“highlighting an urgent need for stronger consumer protections including more universally robust trustee oversights, clearer fee transparency, and global advice fee caps to ensure all fees deducted from Australians’ super are always reasonable and proportionate”
After all the compliance, fee sign offs, compliance audits and fee caps on industry and retail funds, this statement is ridiculous. Advisors are heavily scrutinized when it comes to fees and our best interest duty. Statements like this will only lead to a bigger advice cap and increased costs to consumers from their cashflow which they might not be able to afford and will lead to not obtaining advice.