Australians would be nearly $200,000 better off at retirement by aligning with a super fund that charges fees at a rate of less than 1 per cent, compared with fees charged at 2 per cent of the balance, new research has revealed.
StockSpot’s Fat Cat Funds report found that $7 billion of Australians’ super is being eroded each year in fees, with $150 million simply due to funds charging costs of more than 2 per cent.
Commenting on the findings, the report’s author, StockSpot CEO Chris Brycki, said that “urgent action from the government is needed to make it easy for Australians to see how much super funds charge and compare returns to suitable benchmarks, like a low-cost index option”.
A highlight from the report was that research showed that index funds had beaten 90 per cent of all super funds in 2019.
“Aussies in default super funds would benefit if all their super money went into a low-cost index fund,” Mr Brycki stated.
Similarly, investors would be better off if they simply opened their own index funds, according to the CEO.
“People who manage their own super via a self-managed super fund and invest in index funds have been able to beat even the largest super funds by indexing,” he offered.
Who are the fat cats?
The report labelled any fund charging more than 2 per cent in fees as a “fat cat”.
A number of fat cat funds were listed in the bottom 10 funds of their categories over five years.
The report highlighted ANZ/OnePath as topping the list for the seventh year running, with 11 fat cat funds.
The group also controls 27 per cent of the 40 worst-performing funds, it was reported.
AMP was also in the firing line, with 11 fat cat fund options.
MLC and Zurich came in third place for poorest performance, with three funds charging more than 2 per cent in fees.
Who are the fit cats?
The fit cats – funds that charged less than 1 per cent a year – gave their members 20 per cent more over five years than fat cat funds, the report showed.
The “Fit Cat Funds” were also the top 10 funds of their categories over a five-year period.
StockSpot’s research considered QSuper as the top-performing fund in the country, with nine options falling into the fit cat category.
This was followed by UniSuper, with six fit cat options; and Australian Super, which has four options available with fees lower than 1 per cent.
“One of our golden rules of superannuation is: the less you pay, the more you get,” Mr Brycki said.
“Always pay less than 1 per cent p.a. in fees so your super isn’t eroded by high fees.”
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