StockSpot’s Fat Cat Funds Report reveals the big super ‘rip-off’

One of the golden rules of superannuation is, the less you pay, the more you get.

StockSpot’s Fat Cat Funds Report reveals the big super ‘rip-off’

Australians would be up to $200,000 better off at retirement if their super fund charged fees at a rate of less than one per cent, compared with fees charged at two per cent of the balance, says new research.

StockSpot’s annual Fat Cat Funds Report, which labels any fund that charges more than two per cent in fees as a ‘fat cat’, revealed that $7 billion in super is eroded each year in fees alone, with $150 million going to funds charging more than two per cent in fees.

While most older Australians would think this news applies mainly to younger people with decades of super earnings ahead of them, they should think again, as two per cent in fees also eats significant portions of mature super funds.

“A typical ‘fat cat fund’ charges two per cent per year in fees. Two per cent doesn’t sound like a huge sum, but over decades, the devastating impact of high fees is best seen,” says report author and StockSpot chief Chris Brycki.

“Too many Australians are in a fat cat fund and unaware of the impact that compounding high fees have on their long-term savings.

“Switching out of a fund charging two per cent per annum to one charging 0.50 per cent per annum, a 60-plus-year-old could increase the super they’ll have by $35,000.”

Mr Brycki also shared advice for people managing their own super.

“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 said.

ANZ/OnePath topped the list for the seventh year running, with 11 fat cat funds. The same group also controls 27 per cent of the 40 worst-performing funds.

AMP also had 11 fat cat fund options, and MLC and Zurich were in third place for poorest performance, with three fat cat funds each.

On the other hand, ‘fit cats’ – funds that charged less than one per cent a year – gave their members 20 per cent more over five years than fat cat funds, the report revealed.

QSuper was listed as the top-performing fund in the country, with nine ‘fit cat’ options, followed by UniSuper, with six fit cat options, and Australian Super with four fit cat options. 

“One of our golden rules of superannuation is, the less you pay, the more you get,” Mr Brycki said.

He also offered advice for the best type of fund for older Australians.

“Balanced or moderate super funds are probably best for you. Both have more defensive assets like bonds and cash to smooth your returns and reduce the potential for large losses which becomes more important as you approach retirement and once you’re retired,” he said.

“Move into a balanced or moderate fund. As you move into your 60s and near retirement age, your main aim is to preserve the wealth you’ve accumulated and ensure it still earns a decent return. Pay less than one per cent in fees. Find a fund with low fees. Remember you could save over $35,000 simply by paying less for your superannuation.

“Making a change now can still have a significant impact on your final superannuation balance.”

Is your fund a fit cat or a fat cat? Are you aware of your fund’s fees? Are they eroding your savings?

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    COMMENTS

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    mogo51
    2nd Sep 2019
    10:22am
    I have been with Energy Super for 10 years and very happy. Low fees, solid performance and returns, good Admin.
    TREBOR
    2nd Sep 2019
    11:04am
    What a surprising list.... (not) .... **ROFL emoticon inserted**
    TREBOR
    2nd Sep 2019
    11:08am
    One (one only of several) fault with the current super setup is the application of fees 'equally' to all accounts - meaning someone on a low or broken in service income/super contribution will lose a huge amount of money - a person doing a seasonal job, for example, and then nothing (say in a quiet country town) could build up a little super, and then watch it rapidly vanish into the gaping maw of the fund over the next nine months or so, leaving them with nothing.

    What point is there in that? If the aim of super was to assist in providing a retirement income for all, why then are there no lower limits on the amount in an account before fees are removed? Obviously taking back what is contributed is not doing one thing for the part-time, low income or seasonal worker and similar.
    adbob
    2nd Sep 2019
    11:21am
    @Trebor - second comment

    I think the killer there is the default insurance that they throw in. If you cancel that the admin fees are not too great in accumulation mode in most Industry Funds.

    Industry Funds are supposed to be the good guys - I would say that more accurately they are the best of a bad lot.

    If regulation stamped out default insurance (useless to most people - doubly so if they already have it from another fund) a lot of the problem would be solved - getting rid of excessive flagfall fees for small accounts would also help.
    TREBOR
    2nd Sep 2019
    11:50am
    Yes - there is that, bob... it's a silly thing since it is supposed to cover you until you finish work - or 65 I think it is, but it's almost impossible to get out of them in 'the event'.....

    Agree with your view that industry funds are the best of a bad lot... but not the complete answer... I remain firm in advocating a one-stop shop without any control by anyone - a truly independent body which treats all by the same rules and draws its running costs from profit without taking from contributions. At least that way contributions will stay untouched... even in the event of a financial disaster such as many are predicting is just around the corner...

    Have no concerns - like the Great Depression, all will be resolved with a huge dust-up internationally, which is also very much on the cards.

    It's not for nothing that, at the start of the year, I titled 2019 The Year Of Decision.....
    TREBOR
    2nd Sep 2019
    11:56am
    For a rough comparison - just look at the Future Fund, out of the hands of everyone in a safe haven and paying no tax here etc....... such a fund should rightly be for everyone, not just Howard's select favourite group.... and not on money pilfered from the National Treasury like some filthy Third World Banana Republic dictator would be so adept at doing.... for the good of the people and the republica, of course...

    Now our politicians can make sound decisions without any concerns over their decisions affecting their own retirement package....... full speed ahead and damn the peasantry .... they'll live on trickle-down... or die ...

    Always makes my old heart feel good to know that our elected politicians never have to worry about the troubles that afflict the ordinary person...... wonderful race the politicians.... we'll probably get off with crucifixion .... regular jailer's pets we are down here...
    adbob
    2nd Sep 2019
    11:15am
    The article doesn't distinguishe between fees charged in accumulation mode (the most frequently quoted) and fees charged in pension mode - they're often very different.

    I was about to roll my investment in one fund over from accumulation to pension mode and I was shocked to find how much the pension mode fees were compared with those in accumulation mode.

    Some funds will boast about how low their accumulation mode fees are in the hope that most people just roll it all over into pension mode with the same fund - at which point they make their killing.

    Bill Shorten's ludicrous franking credit proposals will have scared a lot of people off but small investors can do just as well, if not better, outside of super funds (no income tax payable until >$30,000 pa in any case) by investing directly in shares or ETFs - provided they get their franking credits back. No surprise that Bill has/had a lot of mates on Collins Street.
    danielboonjp
    2nd Sep 2019
    11:43am
    If its Australian Ethical its ripping you off, Sunsuper is close behind
    Older
    2nd Sep 2019
    2:20pm
    Nice except I'm 72+ my super is grandfathered. The company I'm with charges 2%+, including charging me for no service, I distrust it and would like to get out of it. BUT changing funds results in a large reduction in Pension as super is no longer grandfathered. So I seem to be stuck in a super company I detest, has been unethical IMO, and i still have to pay 2% for sweet FA. Then they wonder why we distrust the financial industry.
    adbob
    2nd Sep 2019
    2:30pm
    You need to get advice on this - and I don't mean from another rip-off so-called financial adviser. Being over 72 you can't normally contribute to super but i think you should be able to roll over from one fund to another.

    There are new laws which have only recently come in that might help you.

    I think one thing the new laws do is to protect you from exit fees.
    adbob
    2nd Sep 2019
    3:39pm
    Just looking at a comment below (from the Phonse) I think I see now what you mean by "grandfathered" - that may complicate the issue but, as advised below, check with Centrelink ( a daunting task I know) and calculate the net effect of any proposed move.

    It was obviously bad law that kept people locked in to a possibly bad provider in order to retain a tax break or Centrelink entitlement. I wonder if the recnet legislation (mainly intended to liberate people from lock-ins) has anything to say about that.

    It's all ridiculously complicated. That's intentional. If it were simple nobody would need a financial adviser. In reality most people now don't really need one - but in some situations there's a lot to understand.
    Alexii
    2nd Sep 2019
    5:52pm
    I'm getting close to 80, Older, though I don't feel that age at all. Now re super - I was with State Super Financial Services for years since I retired and was disappointed with the small growth each year and especially when I compared it to some other funds. About 3 or 4 years ago I finally I did what I should have done long before. I switched my super funds to Australian Super. Since then it keeps growing even after I get my regular quarterly payments (the minimum amount that satisfies Centrelink rules. The only effect on my part pension is that my super asset has continued to grow so therefore my total assets have grown. So have a look at one of these better industry funds, Older. The sooner you do the greater the benefit you will get over the years.
    VeryCaringBigBear
    2nd Sep 2019
    2:59pm
    I was in one of the better preforming funds 20 years ago but to me it wasn't preforming so I set up my own SMSF. One of the best things I ever did.
    VeryCaringBigBear
    2nd Sep 2019
    2:59pm
    I was in one of the better preforming funds 20 years ago but to me it wasn't preforming so I set up my own SMSF. One of the best things I ever did.
    The Phonse
    2nd Sep 2019
    3:21pm
    "OLDER." check with Centrelink ..I got out and lost the 'grandfather' status but It did'nt effect my pension. You have to be earning a fairly high income to go from asset tested to income tested.
    Older
    2nd Sep 2019
    3:51pm
    Paid $2200 for advice from a Fund that is in the top 3 and who would benefit from me transferring to them - result can't rollover, and take a pension hit if I do change funds, a hit that is greater than the amount saved from fee reduction. Checked with Centrelink - your super would no longer be grandfathered and your pension reduced a few thousand a year. So take a pension hit or stay with some *&%^$ fund that has been unethical and taken money for no service and charges high fees. Maybe take the pension hit just to spite the the current fund.
    Intellego
    2nd Sep 2019
    3:56pm
    Basic super axion: GREED RULES.
    Karl Marx
    2nd Sep 2019
    4:21pm
    All the Retail fund supporters of past have become non existent as as well as those that kept saying they would trust or put their money in an industry fund because it's run by overpaid union thugs.
    Maybe they're to busy moving their money over to the industry funds lol
    Karl Marx
    2nd Sep 2019
    6:13pm
    They wouldn't put their trust or money, typo lol
    leoniey
    2nd Sep 2019
    7:10pm
    Lucky to have worked for a Government Department and am with Q Super (although anyone can join now). Q Super have always been one of the best funds to be with and although I'd only been contributing for 11 years I had enough for a modest early retirement. My Q Super fund is looking after me quite well and my super is still growing while giving me a decent income. That said, I stopped all the insurances and got advice on which way to invest, choosing half on a higher risk option with the other part balanced.
    Mamacrystal
    3rd Sep 2019
    10:13pm
    Me too Leonley. My small amount of super has been with them for a long time....good crowd to deal with!


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