Employees warned not to leave corporate funds

Employees who leave wholesale corporate superannuation funds in favour of retail funds could be financially harmed and may end up paying fees double or triple those of their current funds, independent superannuation consultancy, The Heron Partnership, has warned.

The consultancy had released research which found most company funds charged combined administration and investment fees of between 1.2 and 0.65 per cent of member's fund assets while retail funds charged average fees of 2 per cent or higher.

The Heron Partnership managing director, Chris Butler, said larger employer organisations could also negotiate lower fees than smaller companies or individuals because they had better buying power.

For example, the research found a corporate fund with 250 members and $10 million assets would charge fees of around 1 per cent, while fees on a similar fund with 2,500 members and $200 million assets would be only 0.7 per cent. Retail fees on the same fund could be higher than 2.00 per cent, according to the research.

"The work we've done clearly shows that most people will be much better off - at least on a cost basis and therefore on an ultimate benefit basis - by continuing with their current employer's default fund," he said.

Butler said it was critical that employees understood the features of their current funds before deciding whether to change.

"Employers need to provide easy to understand information to their employees and part of this needs to be a warning about hasty decisions."

He said employers would want to assist their employees as much as possible in the lead up to choice. "However, employers cannot step across that line between information and advice and as a consequence we anticipate an increase in the need to provide employees with workplace financial services and advice," he said.

The consultancy has released a tool called "Heron Adviser" to assist financial planners in making independent and individual comparisons of superannuation funds. The tool will be launched by a number of financial institutions and financial planning groups over the next few months.