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?
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