Super administration fees: flat dollar fees vs percentage fees, and which costs you more

A super administration fee pays for running your account: record keeping, statements, the call centre and app, compliance and the trustee's own costs. Most funds charge it in two parts — a flat dollar amount (often quoted per week) and a percentage of your balance — and some cap the percentage part once your balance passes a set level. Which structure costs you more depends almost entirely on your balance: flat fees bite hardest on small balances, percentage fees on large ones. Work the fee out in dollars on your own balance before comparing funds.

This guide expands one line of the super fund fees overview. All fee figures here are illustrative, not the fees of any real fund. General information only, not financial advice.

What the administration fee covers

In a PDS, the line is called administration fees and costs. It can include:

• the fee deducted directly from your account (the flat and percentage parts);
• administration costs the trustee pays from fund reserves rather than charging you directly, which must still be disclosed;
• in many funds, the cost of intra-fund advice — simple advice about your account, such as contribution levels or investment option choice, available to all members without an extra charge.

It does not include investment fees, transaction costs or insurance premiums, which are listed separately. When you compare administration fees, make sure you compare the full line, including any part paid from reserves.

Flat, percentage, or both: three structures

Some funds apply a cap on the percentage part (for example, no further percentage fee on the part of a balance above a stated amount) or tiers with lower rates on higher balances. Read the footnotes to the fees table carefully.

Worked example: the same two funds at three balances

Illustrative Fund A: $2.00 a week + 0.10% a year. Illustrative Fund B: $0.50 a week + 0.30% a year.

Working: flat fee × 52 weeks, plus balance × percentage. Fund A's flat fee is $104 a year and Fund B's $26, a difference of $78. Fund B's percentage is 0.20 points higher, so the funds cost the same where 0.20% of the balance equals $78: $78 ÷ 0.002 = $39,000. Below that, Fund B is cheaper on administration; above it, Fund A is.

That break-even point is a useful way to think about any two fee structures: divide the difference in flat fees by the difference in percentage rates.

Administration fees are only part of the picture. If Fund A's investment fees for your option are 0.3 points higher, the total comparison could reverse. Always add the investment fees and costs for the option you would actually hold.

Multiple accounts: paying the flat fee twice

The flat part of the administration fee is charged per account. Someone with three accounts left behind by three jobs pays three flat fees, and often three sets of insurance premiums.

Illustrative example: three accounts each charging $1.50 a week:

• Flat fees: 3 × $1.50 × 52 = $234 a year
• One consolidated account: $1.50 × 52 = $78 a year
• Saving on flat fees alone: $156 a year

Over 20 years, $156 a year that stays invested at an illustrative 6% return after fees would grow to about $5,700. The percentage fee is charged on the total balance either way, so consolidating does not reduce it unless the fund you keep charges a lower rate.

Before you combine accounts, check what insurance each account holds, because rolling an account over usually ends its cover. See consolidating super through myGov and insurance inside super.

Protections for small balances

Two rules limit the damage fees can do to small, inactive accounts:

• The 3% fee cap. For an account with a balance below $6,000 at the end of the fund's income year, certain administration and investment fees and costs are capped at 3% of the balance for that year, and any excess must be refunded to the member.
• Transfers of inactive low-balance accounts. Funds must report and transfer to the ATO accounts with a balance below $6,000 that have been inactive for a set period, unless the member has taken certain steps. The ATO then tries to combine that money with your active account. See finding lost and unclaimed super.

These protections reduce the harm but do not replace checking your own accounts. Check the current conditions on the ATO website.

A short checklist for reading the admin fee line

1. Find the administration fees and costs row in the PDS fees and costs summary.
2. Note the flat amount and convert it to a yearly figure.
3. Note the percentage and any cap or tier.
4. Check whether any administration costs are paid from reserves and shown separately.
5. Work out the yearly dollar figure on your balance — the annual super fee calculator does this.
6. Repeat for every account you hold, then add them together.
7. Compare with YourSuper, which shows fees on a standard balance for MySuper products; see the YourSuper guide.

Administration fees are usually smaller than investment costs; see investment fees and indirect costs for the other main line, and the performance test, which benchmarks administration fees as well as returns.

Frequently asked questions

Is a flat fee or a percentage fee better?

Neither is better in general. A flat fee is cheaper for large balances and a percentage fee is cheaper for small ones. Work out the break-even balance between the two structures you are comparing.

Does my employer pay my administration fee?

Usually not. Some employer arrangements negotiate a discount or have the employer pay part of the fee, which is one reason to check before leaving an employer's default fund. Ask your payroll or HR team.

Why do I still pay a fee when no contributions are coming in?

The fund still holds and administers your account. Fees continue until the account is closed or transferred, which is why inactive accounts slowly shrink. Consider consolidating, after checking insurance.

Is intra-fund advice really free?

It is not charged separately, but its cost is generally part of the administration fee all members pay. Comprehensive personal advice usually costs extra.

Official sources

• Moneysmart (ASIC) — fees and costs, choosing and consolidating super
• ATO — YourSuper comparison tool, inactive low-balance accounts, finding super in myGov
• ASIC — disclosure of fees and costs (Regulatory Guide 97)
• APRA — super fund statistics and the performance test, which includes administration fees