Club Plus Superannuation CEO Paul Cahill advised superannuants to be proactive. Picture: RENEE NOWYTARGER

Rapid growth of the super savings pool — from $650 billion a decade ago to more than $2 trillion today — has pushed total fees above $21 billion annually, and independent think tank Grattan Institute believes that we are paying $8 billion more than we should be.

“The total system costs twice as much as it should,” said Grattan Institute’s productivity growth program director, Jim Minifie.

As politicians consider fresh superannuation tax changes, superannuation specialists say people should not ignore the big savings they could make by switching to a lower-cost fund.

Figures released last month by industry regulator APRA show that fees and expenses paid to super funds climbed six per cent last year to $21.7 billion. It included $4.2 billion paid for insurance and $3.9 billion paid for administration, while the bulk went towards investment management fees.

Average annual fees paid across the superannuation sector are about one per cent of people’s fund balances, but Mr Minifie said many members were paying more than two per cent “and that’s way more than they need to”.

“The rule of thumb with fees is if you are paying one per cent too much every year over your whole career, you will end up with about 20 per cent less at retirement,” he said.

“I would be very comfortable asserting that the current system ought to be run for about half of what it is currently run at.”

Jim Minifie, of the Grattan Institute, says super fund members paying more than two per cent are being ripped off. Picture: SuppliedSource:Supplied

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Fees as a percentage of members’ super balances have been falling in recent years. However, a projected surge in total superannuation savings to $3 trillion over the next five years could still add an extra $10 billion to annual fees.

The director of research at Rainmaker SelectingSuper, Alex Dunnin, said many funds were being “dragged, kicking and screaming, by regulation and competition” to lower their fees, but people had to be proactive in finding them.

“Two years ago the average fee that a person in an employer default fund was 1.4 per cent — now it’s just over 1 per cent,” he said.

“The fee ratios are coming down at a greater rate of knots but you have to pull your finger out and join those low-fee products.”

The government’s introduction of low-cost MySuper default funds a few years ago had been fantastic, Mr Dunnin said, but only about 20 per cent of the market was using them.

“The broader trend is fees are coming down, but in dollars terms it’s going up because the pool of super money is going up.”

Club Plus Superannuation CEO Paul Cahill said investment management costs represented between two-thirds and three-quarters of super fund fees. Several industry fund bosses have complained in recent months that fund managers are charging super funds way too much.

Mr Cahill said some expensive super funds would leave you in a high-cost product “until you knock on the door and say ‘please take me out’”.