Superannuation is an Australian government-regulated investment vehicle designed to provide retirement benefits to Australian citizens and residents in the form of compulsory contributions made during their working career.

Changes introduced in July of 2005 allowed Australians to select a superannuation fund of their choice based on their preferred investment strategies and their confidence in the fund to provide the levels of returns expected from their investments.

A significant factor to consider during the choice of funds is the number and amount of fees charged for the maintenance of each account as part of the fund.

Higher fees do not in any way correlate to higher returns. For some funds, higher fees are introduced for additional flexibility, investment options and services. Many retail funds will also charge higher fees to cover the costs of advertising and marketing.

Typical fees charged by superannuation funds include contribution fees which are incurred each time a contribution is made, exit fees for withdrawing money from or leaving the fund, ongoing fees and investment fees which are paid to the investment manager.

Because the idea of superannuation is to maximize your benefit upon retirement, it is important to select funds which charge low to reasonable fees.

Fees, in effect, are taken out from any investment returns you have made which means less money in your pocket at the end of the day. The higher your fees are, the harder your fund investments will need to work to provide adequate returns.

Calculations have shown that even a 1% percent increase in fees could result in 20% less money for you to retire with. Depending on the level of income during your working life, this could be in the vicinity of tens to hundreds of thousands of dollars.

To find out about all possible charges and fees associated with a fund, be sure to obtain a copy of their product disclosure statement which should be issued to you upon request.

Product disclosure statements are required to disclose all applicable fees in a standard format and also provide an example of the calculation of these fees.

If your fund cannot provide you with a copy of this document, you should be wary of their practices and strongly consider using another fund.

Jonathan Bailey is the author of Industry Super Funds, DIY Super Funds and Superannuation Funds.

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