Buy/sell spreads and switching fees in super: what they cost when you move money

A buy/sell spread is a small percentage cost applied when money moves into or out of a super investment option. It covers the trading costs of buying or selling assets for you so that members who stay put do not pay for those who move. A switching fee is a separate charge some funds make for changing investment options, although many charge none. Both are member activity fees: you pay them only when you do something, such as switching options, rolling over to another fund, making a contribution or taking a withdrawal. They are usually small for one move but add up if you switch often or move large sums.

This guide is part of the super fund fees overview. Figures are illustrative, not the spreads of any real fund. General information only, not financial advice.

How a buy/sell spread works

Most super options are unitised: your account holds units, and each unit has a price that moves with the option's assets. Funds often set two prices:

• a buy price (entry price) slightly above the underlying value, used when money goes in;
• a sell price (exit price) slightly below the underlying value, used when money comes out.

The difference is the spread. It is not paid to the fund as profit; it stays in the option to cover the cost of buying or selling assets, protecting the remaining members.

Some funds that do not use unit prices apply spreads differently or not at all. The PDS states the buy/sell spread for each option, often as a percentage for each direction, such as 0.05% on entry and 0.05% on exit.

When spreads and switching fees apply

Because exit fees are banned in super, a fund cannot charge you a fee just for leaving. A sell spread on the money leaving the option is a different thing and can still apply.

Worked example: one switch versus frequent switching

Illustrative member with $150,000 in a growth option moves everything to a conservative option. Spreads: growth 0.10% on exit, conservative 0.05% on entry. Switching fee: nil.

1. Sell spread on growth: $150,000 × 0.10% = $150
2. Buy spread on conservative: about $149,850 × 0.05% = $75
3. Total cost of the switch: about $225

That is a one-off cost of 0.15% of the balance. Not large for one considered decision.

Now suppose the member switches back and forth four times a year trying to time the market. At about $225 per switch, that is roughly $900 a year in spreads alone, or 0.6% of the balance — more than many funds' entire annual investment fee for a balanced option. The bigger risk is often selling after a fall and buying after a rise, which can cost far more than the spread.

Worked example: consolidating two accounts

Illustrative member rolls $40,000 from Fund X into Fund Y.

• Fund X sell spread: 0.08% × $40,000 = $32
• Fund Y buy spread: 0.05% × $39,968 ≈ $20
• Total one-off cost: about $52

If closing Fund X saves a flat administration fee of $78 a year, the spread costs are recovered in less than a year. Insurance in Fund X will usually stop when the account closes, so check that first; see consolidating super through myGov.

Switching fees: what to look for

Many funds allow switches at no charge or a set number of free switches a year. Where a switching fee applies, the PDS states it as a dollar amount. Look for:

• the number of free switches before a fee applies;
• whether an online switch costs less than a paper request;
• whether a partial switch (moving only some money or future contributions) is treated the same as a full switch;
• the processing timetable: switches are usually processed at the next available unit price, so your money is out of the market for a short period.

Ways to keep activity costs down

1. Decide your option deliberately rather than reacting to short-term market moves. See investment option fees compared.
2. Switch future contributions only if you want a gradual change; some funds allow this separately from the existing balance.
3. Consolidate once, not repeatedly. Choose the fund you will keep after comparing it properly; the fund comparison checklist helps.
4. Check spreads before a large rollover, for example when moving to a retirement income product.
5. Watch for advice fees. If an adviser recommends frequent changes, ask what each change costs you in spreads and fees, and why.

Spreads are a one-off cost; the ongoing costs of the option you move into matter more. See investment fees and indirect costs, administration fees and, before a move between funds, the YourSuper comparison tool guide.

Frequently asked questions

Is a buy/sell spread a fee the fund keeps?

No. It is retained in the investment option to cover trading costs and protect other members. It is still a cost to you, which is why it appears among member activity fees in the PDS.

Why does the spread differ between options?

Assets that are more expensive to trade, such as small company shares or emerging market assets, usually have wider spreads than cash or large-company share options.

Can I avoid the spread when consolidating?

Usually not entirely, but the cost of one consolidation is typically small compared with ongoing duplicate fees. Check both funds' spreads if the amount is large.

Does the spread apply to every contribution?

That depends on the fund. Some apply a buy spread to contributions and some do not. The PDS says which.

Official sources

• Moneysmart — switching super funds and investment options
• ASIC — fee disclosure rules, including member activity fees
• ATO — rollovers between funds through myGov
• AFCA — complaints if a switch or rollover was processed incorrectly