A new study by the APRA (Australian Prudential Regulation Authority) has identified a huge discrepancy between the paid fees by superannuation retail funds and those paid for funds not-for-profit, indicating that retail fees show generation of revenues rather than actual expenses.

The study, which was undertaken by Bruce Arnold and Kevin Liu, was released by APRA only this week. The research found that while utilising associated parties to give certain services is not harmful to member of the fund, "the trustees of retail funds pay significantly higher fees to related service providers".

The research said that, in contrast, the paid fees by not-for-profit funds' trustees to associated parties were not higher by a significant amount than those paid to providers of independent services.

The research by Arnold and Liu also went further, saying that the largest disparity between retail funds and not-for-profits occurred in regards to administrative services wherein they discovered "strikingly different fee models used in different contexts". According to the study, for the independent providers and the not-for-profit associated party providers the fees were prevalently related to how many members in a fund. In contrast, however, retail fund associated party providers paid a huge fixed fee and a variable element based on under management assets.

"These different approaches result in the median fund paying $12.2 million in fees under the retail-related administrator, versus only $2.3 million to a service provider who was independent or not-for-profit-related," the study said.

Liu and Arnold indicated that the adopted approach of the not-for-profit funds was intended to minimise the expense of giving superannuation to the members of the fund, while outsourcing through retail funds "does not appear to be intended to reduce members' costs, but instead may constitute part of the revenue model for the retail superannuation product".

Fiona Reynolds, chief executive Australian Institute of Superannuation Trustees, commented on the study saying that it indicated some funds for retail had conflicting outsourcing contracts.