The research was conducted by online investment adviser Stockspot.com.au
What is a Fat Cat Fund?
A super fund investment option is classified as a ‘Fat Cat Fund’ if they were in the bottom 10 performing super funds within a particular risk group (such as balanced, growth, etc) over five years.
Conversely, a super fund investment option is classified as a ‘Fit Cat Fund’ if they were in the top ten performing super funds within a particular risk group over five years.
Main findings
– Australians are still paying too much in superannuation fees
– An individual could lose up to $200,000 because of fees and poor performance by the time they reach retirement age
– The 40 worst performing super funds (‘Fat Cats’), hold $5.5 billion and charge Australians $117 million in fees every year
– The average Fat Cat Super Fund charges 2% in fees per year, compared to ‘Fit Cat Funds’ who charge less than 1% per year
– Fit Cat Funds outperformed Fat Cat Funds by 22% over five years.
The worst 3 Fat Cat Super Funds in 2020
AMP and OnePath account for more than half of the worst 40 Fat Cat Funds, with Macquarie taking third place.
$5.5bn of Aussies’ superannuation is sitting in the worst 40 Fat Cat Funds, costing them over $117m in fees every year. A typical Fat Cat Fund charges 2.13% in fees vs a Fit Cat Fund which charges 0.97%.
AMP has been a Fat Cat for eight years in a row, and in 2019 had approximately 1.5m member accounts according to ASIC. AMP has also made history by being the first Fat Cat Fund to have a super fund that delivered a negative return over five years with one of their options delivering a total return of -2.2%.
The main factors that contribute to low performing funds are a complex product suite, high fees and poor performing investment options.
The best 3 Fit Cat Super Funds in 2020
In 2020, Unisuper, who manages $80bn of Australian’s superannuation investments, took the Gold Fit Cat Fund award for the most top performing funds over five years.
The Silver award goes to IOOF with 4 Fit Cat Funds, and the Bronze award goes to Australia’s largest superannuation fund, AustralianSuper, which manages more than $160bn for over two million members.
The one factor the top three Fit Cat Funds have in common is they all charge less than 1% in fees per year.
Chris Brycki, author of the report and CEO of StockSpot.com.au comments:
“Superannuation is the biggest investment most Australians have, yet most people have no idea how much they stand to lose if they’re in a Fat Cat Fund.
“One of the golden rules of superannuation is the less you pay, the more you get. Always pay less than 1% p.a. in fees so your super isn’t eroded by high fees. Unfortunately, there are almost twice as many high-fee funds (more than 1% p.a in fees) than low fee funds (less than 1% p.a in fees).”
Brycki also notes that people can be reluctant to change, and even when they know they’re in a Fat Cat Fund, prefer to turn a blind eye than spend the ten minutes required to save themselves serious cash in the future.
