The advantage of a workplace scheme
At 45, Jenny had become mortgage-free and wanted to start saving for her retirement. She thought she would be working for another 20 years, and if she saved $5,000 a year (10% of her net pay) she would achieve what she wanted.
A friend of Jenny was an agent for a personal superannuation scheme. Her employer also had a scheme, but it wasn’t subsidised. Jenny decided to compare the fees for both schemes to make the best decision.
Here’s what she found out:
| Fees | Employer Scheme | Personal Scheme |
|---|---|---|
| Entry | Nil | 5% of first and any increased contribution |
| Administration | $60 p.a. | 1% p.a. |
| Contribution | Nil | 1% of each amount |
| Brokerage | 0.3% (av.) | 0.5% (av.) |
| Investment | 0.3% p.a. | 1.5% p.a. |
| Switching | Nil | $100 |
| Trustee | 0.1% p.a. | 0.1% p.a. |
| Out-of-fund costs | Nil | 0.02% |
| Exit | Nil | Nil |
Jenny discovered that overall the employer scheme was cheaper for fees, except for the exit and trustee fees where there was no difference between the schemes. And while the personal scheme’s administration fee was cheaper in the first year, the employer’s administration fee would be cheaper from the second year onwards.
Jenny also asked both providers to estimate what she would end up with after 20 years, using a return of 8.5% a year before tax (at 33%) and fees. She found that under the employer scheme, she would end up with $172,300, compared to $145,470 with the personal scheme. It was no contest – Jenny chose to join the employer’s scheme.
