The wrong choice of super fund may cost you $100,000

By choosing the wrong super fund, people in their 50s could lose $100,000.

The wrong choice of super fund may cost you $100,000

Choosing the wrong super fund could cost people in their 50s $100,000 in the years leading up to retirement, new research has revealed.

Investment adviser Stockspot analysed 3820 funds in its 2016 Fat Cat Funds Report, highlighting poor transparency, high fees and any conflicts of interest in the investment industry.

Splitting funds into five categories, named Fit Cats, Fine Cats, Fair Cats, Flabby Cats and Fat Cats, the report judged how each fund performed, from best to worst.

To be classified as a Fat Cat, the fund needs to have seriously underperformed by 10 per cent or more over periods of one, three and five years.

The report revealed that Fat Cat funds, on average, charge an average of 2.04 per cent of the fund in fees each year, in comparison to Fit Cat funds, which charge only 0.94 per cent.

This means that a 30-year-old is expected to lose 24 per cent of their lifetime super if they invest their money in an average Fat Cat fund. In monetary terms, the amount lost would be around $285,208 for men and $232,514 for women.

The report doesn't show retail super funds in a positive light in comparison to industry super funds. In fact, 40 per cent of retail super funds are ranked as Fat Cat funds, or Flabby Cat funds, in comparison to just 13 per cent of industry super funds. Similar results were seen at the other end of the spectrum, with just 14 per cent of retail super funds considered Fit Cat funds in comparison to 38 per cent of Industry super funds.

The majority of the worst performing 638 Fat Cat funds are controlled by the big four banks and AMP. ANZ (OnePath) took out the Fat Cat award, with AMP/AXA in second and Westpac (BT) in third. The Fit Cat awards went to Investors Mutual, with SG Hiscock and Company in second and Rest Industry Super in third.

Does the superannuation industry need tighter regulations surrounding maximum fees? Should the default super fund for all Australians automatically be one of the three best-performing industry super funds?

Find out more at www.businessinsider.com.au
Find out more at www.theage.com.au
Read the full report at www.stockspot.com.au

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    COMMENTS

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    29th Sep 2016
    10:15am
    I used to find it offensive that people were being ripped off by the banks and other high charging institutions.

    But - when people keep using the same banks who are pilloried almost daily in the media for ripping people off in every imaginable way - I no longer have any sympathy - they deserve to lose their money as punishment for taking no action.
    Retired Knowall
    29th Sep 2016
    1:54pm
    Spot on, a fool and his money are easily parted.
    Old Geezer
    29th Sep 2016
    3:01pm
    The banks I use offer me nothing but a good service and advice if I ask. I haven't heard personally of anyone being ripped off by a bank. I have heard all the media beat up stuff but that's a result of greed where people are looking for someone else rather than themselves to blame. I know quite a few people that borrowed too much and something happened and they couldn't pay their loan repayments. That is not the fault of the banks.
    Anonymous
    29th Sep 2016
    3:56pm
    Which just goes to prove that you can't read and comprehend - which is probably congruent - because you certainly can't write.
    Old Geezer
    29th Sep 2016
    4:18pm
    Ummmm. Funny about that as I thought the subject was about super fund fees and here we have a comment about being ripped off by the banks.

    That said why would you use a bank for a super fund anyway? Banks are for banking not anything else.
    Anonymous
    29th Sep 2016
    4:31pm
    I think you should stop reinforcing your VERY SIGNIFICANT reading and comprehension disabilities while you still have a small shred of self-respect remaining.
    Old Geezer
    29th Sep 2016
    4:35pm
    Ha ha there is no fun in that at all.

    I'm way too old to have any self-respect left now.
    Rae
    29th Sep 2016
    5:12pm
    I actually borrowed too much at the wrong time because the bank manager lied to me right at the point where the old fashioned trustable manager was becoming the new fangled never believe a word they say unless you double check modern equivalent.

    Anyone who invests super with a bank off shoot is asking for high fees and poor service.

    I've seen the prospectus from the likes of MLC and they are very expensive forms of investing as far as I can see.

    OG is right using a bank or off shoot to manage super is a very expensive way to go about it.
    Tom Tank
    29th Sep 2016
    11:05am
    The LNP have this in hand as they are determined to open up the Boards on Industry Funds to the same people who sit on the Boards of Retail Funds.
    Old Man
    29th Sep 2016
    1:05pm
    "Does the superannuation industry need tighter regulations surrounding maximum fees? Should the default super fund for all Australians automatically be one of the three best-performing industry super funds?"

    These are the questions and my short answer is yes for the first and no for the second. My reason for yes is that the compulsory super has never been properly regulated. Sure, there are loose rules but some smart funds have worked out how to get around the rules and exploit those who don't fully understand how it all works or forced to use a super fund by their employer or their union. Keating's super scheme is one of the best things to be given to Australia but I'm sure he never envisaged the shonks that have overtaken his scheme. Now that we have had over 20 years of compulsory super, I believe that all of the loopholes and sharp practices should have been identified and must now be cut down. I have great faith in our legal people in the public service to undertake such a task and the sooner the better.

    My reason for no in the second question is that such a system will involve people being forced to move from fund to fund as each year's results are posted. Anyone who knows anything about the insurance industry will tell you that the best performer is never the same year by year. It's the same with the stock market where this year's best performers may not be in the top 10 next year. I think strict regulation will allow a freedom of choice.
    Old Geezer
    29th Sep 2016
    3:05pm
    The big problem I see with a lot of super funds is their life and disability insurance. Super funds should have been for super only without these insurances. Why? Because they are nothing but a cash cow where people are being ripped off with excessive premiums.
    Rae
    29th Sep 2016
    5:16pm
    True OG. I opted out as I had no dependents and private income. my fees are cheap and the yields actually allow compounding with a very small starting amount even paying the 15% tax in an accumulation fund. I am a bit sad I couldn't add to it but letting it run a while will be okay as long as income is greater than tax and fees.
    FrankC
    29th Sep 2016
    3:26pm
    I'm not at all surprised to see AMP in the Fat Cat section. I worked for them many years ago, and had commission ripped off me in a shady deal ($1200 ), and also that the parents who took out JN policies on their children and had been paying into the policy, were told they were no longer worth anything. You can imagine the reaction.!
    Old Geezer
    29th Sep 2016
    3:48pm
    You would be aware of what happened back in 1987 when the sharemarket crashed then. The early bird certainly got the worm back then.
    Rae
    29th Sep 2016
    5:20pm
    I paid into one of the private life insurance policies to cover my kids after my husband died. I was supposed to get around$80 000 at the end according to the prospectus. It was actually $32 000 when the time came.

    I simply refuse to trust any figures that predict into the future. It is nonsense.


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