Q My daughter is a university age student who has less than $400 in superannuation from a part time job. When her most recent statement arrived it showed that a significant amount had been deducted in fees. She is planning on travelling and working overseas and therefore will not be making any contributions in the immediate future.  I am concerned that the fees will continue to eat away at the small but not insignificant superannuation savings. What options are available to her to stop the fund chipping away from what she has saved?

AFees and costs withdrawn from a Superannuation fund arise from a number of different sources.  Usually the largest expense would be Contributions Tax which is levied on new employer contributions made to the fund within the financial year.  The tax rate is 15% on contributions received.  Other fees can be the cost of insurance attached to the fund, annual membership fees, contribution and investment fees and administration fees.

Low account balances are protected under Member Protection Rules.  If a Superannuation fund holds less than $1,000, the fund provider is not allowed to charge membership or administration fees greater than $10 more than the rate of investment return that the fund has generated in the year.  The refund of fees charged will usually appear on your statement as a fee rebate.

Please note that contributions tax is still applicable on new contributions to the fund even if the account balance is less than $1,000.  From 1 July 2012, if her income is less than $37,000, she will receive a refund of the Contributions tax levied on new contributions to the fund.  This is known as the Low Income Super Contribution.  The money is refunded directly to the fund by the ATO on verification of her income.

I suspect that the reason why her account balance has been eroded is that insurance premiums are still levied on account balances of less than $1,000. Please check if your daughter has insurance benefits, if they are needed and how much they cost.  The impact of negative fund performance could also be another factor.  Negative investment performance is not eligible for refund.

Given she is likely to earn less than $31,920 in the Financial Year, under proposed Budget changes, if she contributes up to $1,000 to Superannuation from take home pay, the Government will contribute up to $500.  Retirement Saving is probably not her first priority but not a bad return of 50% on what she contributes with no contributions tax applicable on either her contribution or the co-contribution.

The best way to reduce costs on Superannuation is to consolidate all your Superannuation into one fund that has the benefit and features that you require at a competitive price.