Latest findings derived from the 2015 Stockspot Fat Cat Fund Report reveals that 1 in 2 hard-working Australians under the age of 40 won’t have enough super to make ends meet during retirement if they’re with a ‘Fat Cat’ superannuation fund.

The ‘Fat Cat Funds’, those who have consistently performed worse than their peers in most cases due to high fees, are significantly impacting the balance of the average super nest egg by the time an individual reaches the retirement age of 67.

High fees are causing such a detrimental effect on people’s super balances, that most of today’s 30 year olds will not be able to enjoy retirement without relying on the Age Pension if they stay in a ‘Fat Cat Fund’ explained Chris Brycki, CEO of Stockspot and driving force behind the 2015 Stockspot Fat Cat Fund Report. This is despite the superannuation guarantee rising from 9.5% currently to 12% by 2025.

“It’s terrifying to think that most 30 year olds will not be self-sufficient at retirement. To have a modest retirement, the Association of Superannuation Funds of Australia estimates a couple needs $34,051 per year to cover living costs.

“We estimate a 30-year-old couple, with a combined income of $120,000 in 2015, will only have $23,104 to spend each year at retirement if they remain in a ‘Fat Cat Fund’. That’s nearly an $11k shortfall annually. Switching to a fund charging 0.5% per year in fees could mean that same couple has $35,261 each year, or 52% more to enjoy when they retire.

“It’s also worth noting, an average 30 year old couple will pay close to $450k in fees by the time they reach retirement in a ‘Fat Cat Fund’. I know I’d personally prefer to have that money in my account to spend, rather than lining the pockets of the super funds!” explained Mr Brycki.

Consumers are being kept in the dark by their banks and advisers about the devastating impact high fees are having on their long term savings.

“With ANZ (OnePath) taking the cake for the second year running with the most ‘Fat Cat Funds’, followed by CommBank (Colonial First State), AMP/AXA, Westpac (BT) and NAB (MLC), consumers are paying over $790 million in fees every year to poor performing funds! Also, it may shock some, but 72% of the ‘Fat Cat Funds’ come from the big four banks or AMP.

“The biggest thing to take away from all this is that no one is locked into a ‘Fat Cat Fund’.

“It’s simple to switch into a fund that charges 0.5% or less, giving all age groups a much better chance of having an adequate super nest egg at their disposal. In 2055, there are projected to be 40,000 Australians over the age of 100, as compared to 5,000 today; I’d love to see all of them living comfortably, and on their own terms,” said Mr Brycki.

The government also has a greater role to play.

“By putting more pressure on fees through a tender process for default super, the government could rid the country of ‘Fat Cat Funds’ and reduce our country’s reliance on the Age Pension – currently costing Australian taxpayers $44 billion per year. Lower super fees could increase super balances by roughly $13 billion per year and reduce and reduce Age Pension payments by a quarter,” concluded Mr Brycki.

The best performing funds this year, as announced in the 2015 Stockspot Fat Cat Fund Report, include: Investors Mutual, Lazard Asset Management, Retail Employees Super Trust (REST), Legg Mason Global Asset Management, SG Hiscock and Company and Vanguard Investments Australia.

People can see how their funds stack up by visiting the website.

The full 2015 report is available for download.

Source: Stockspot

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