Unisuper has just had a shocking year on the markets and now they are trying to jack up fees as well. Peter Mair is not happy.
Until now UniSuper has charged members drawing allocated pensions $120 per annum (over and above charges of some 0.4% paid to the external funds managers controlling the investments). From 1 January the plan is to charge the $120 plus an additional 0.2% of the account balance — simply for the administration of the account. For an account balance of $750,000 the cost of ‘administration’ will increase from $120 to $1620 — why? for what?. All up, for members taking allocated pensions, the decision would effectively take 5% of their account balance. That’s not fair.
Administrative costs for managing accounts are not proportional to the value of funds in the account and should not be charged as if they are. A recurrent theme in the criticism of the outrageous pricing practices in the superannuation industry is fees for administrative services calculated as a percentage of funds under management. UniSuper is proposing to levy taxes on some members to pay for giving underpriced services given to other members. UniSuper has no business doing this — and it sets bad example in an industry that is already ‘of the rails’ in misusing exploitative pricing practices. Has UniSuper joined the ‘robbers’?.
The time to complain is now — get UniSuper back on the side of the angels.
Over the past year I have contributed to the public debate about fees charged by superannuation funds for account administration. Having extolled the virtues of UniSuper keeping fees low, I must clearly object to planned changes in pricing practices at UniSuper that I regard as inappropriate and unjustified.
To say that fees are being increased to allow UniSuper to expand member services flies in the face of efficiency, fairness and a competitive market for financial advice. The provision of ‘new’ services is likely to reflect in an excess demand for, and over-supply of, such ‘free’ and ‘underpriced’ services from UniSuper.
In short, the plan is to provide ‘compulsory’ and ‘free’ advice to ‘dependent’ customers when the better objective would be to offer advice to those customers on a fee-for-service basis. The high-cost/free-service approach becomes a tiger on the back of efficient and cost-effective administration — and cross-subsidisation becomes endemic when it should be eschewed.
It would be a valuable service to the general community if UniSuper with the support of the academic community were to encourage the establishment of a cost-effective business providing advisory services about superannuation. It might well be preferable if UniSuper and other like-minded, not-for-profit providers of superannuation services pooled their resources to deliver advisory services in cost-effective way with fees for service to recover costs.
In the absence of a national pension plan (or effective government policy for superannuation services) it seems to be left to the industry funds — like UniSuper — to set the benchmark for cost-effective delivery of superannuation services. I am most disappointed that UniSuper would consider departing from that ethos of cost-effective member service and cost-based pricing principles.
The AMP and NRMA among others were once not-for-profit businesses serving their members. Now having ‘sold out’ the members they and others offer retail superannuation products with annual fees typically in the range of 2 to 2.5% p.a.
It is a slippery slope that any member of UniSuper would hope the management stays well away from. It is most unlikely that the members of UniSuper, if properly advised, would endorse the proposed increases in fees for allocated pensions. It is quite likely that they would strenuously object. They sure should.
The next step is for the management and trustees of UniSuper to defer the plan and provide proper personalised advice and credible explanation of the planned changes to which the members are entitled — and invite comments.
* NB Peter Mair has an allocated pension account with UniSuper and other investments with ‘industry’ super funds.