Australians who are paying more than 1.5 per cent in superannuation fees stand to lose $226,261 by the time they retire, according to new analysis.
Investing in a low-fee superannuation fund is one of the best ways that Australian women can increase their retirement balances, Stockspot founder Chris Brycki said on Thursday.
This is critical, given the average Australian woman will retire with around one third less in their superannuation than their male counterparts he added.
“If you’re a 30 year old woman and you’re paying 1.5 per cent per year or more in super fees, you could pay over $226,261 in excess fees in your lifetime,” Brycki said while releasing Stockspot’s latest Fat Cat Funds report.
“Additionally, if you’re in the wrong strategy for your life stage, this could also cost you significantly by the time you retire.”
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He said superannuation fees should be ideally less than 1 per cent, and it’s also important to ensure that the investment strategy is appropriate for the member’s stage of life and risk appetite.
“Broadly speaking, the younger you are the more risk you can take and the older you are, the more conservative your strategy should be,” he said.
The Fat Cat Funds Report analyses 600 super funds by risk category, before assessing how their returns measure up against their fees.
Someone switching from a ‘fat cat’ – or low-performing, high-fee fund – to a better ‘fit cat’ fund can stand to save as much as $28,000 within five years, Brycki said.
While the new ATO YourSuper comparison tool is a good starting point for people curious to know more about how their super is doing, it focuses only on funds’ default, or MySuper, options, Brycki said.
“According to SuperGuide, approximately half of all super accounts (around 14 million) are invested outside of MySuper. This makes the YourSuper tool less compelling,” he said.
Additionally, the YourSuper tool compares funds by performance and fees, but not by risk profile.
Instead, investors are better off comparing their fund to others with similar, or more appropriate, risk profiles and then looking at the fees and performance within that lens.
“The Fat Cat Funds Report is focused on making it as clear as possible so that everyone can determine the best fund for them,” Brycki said.
“Performance is going to vary, because it’s very dependent on the level of risk you’re taking. And for every stage of life, you’ll have a different risk profile and investing strategy. The right strategy is to identify the sort of risk you should be taking for your life stage.”
Australia’s 'fittest' funds
UniSuper and Qantas Super ranked highest in Stockspot’s report, with each of those super funds offering four “fit cat” products each.
They were followed by AustralianSuper and Fiducian Super which offer three fit cat funds each, and then IOOF, Aware Super, AMG Super and Holden Employees Superannuation Fund which offer two fit cat funds each.
Australia’s 'fattest' funds
At the other end of the spectrum, OnePath was deemed Australia’s worst performer, offering 10 “fat cat” products. AMP offers six fat cat funds and MLC, Zurich and Energy Industries Superannuation Scheme (EISS) offer three fat cat funds each.
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