Checking super can boost your retirement by hundreds of thousands of dollars.
Checking super can boost your retirement by hundreds of thousands of dollars.

Worst fat cat super funds revealed

Exclusive: The difference between having a good or bad superannuation fund can mean missing out on seven times the investment growth each year, a new report shows.

 

Some super fund members have enjoyed average annual returns near 8 per cent for the past five years in the widely-used growth option, while others received just 1.2 per cent, prompting a fresh warning for people to check their super.

Online investment service Stockspot examined the 100 largest funds - covering about 90 per cent of all super savings - and found HESTA's Eco Pool option averaged 8.6 per cent annual growth, Unisuper's Sustainable Balanced option grew 7.5 per cent and Australian Super's Balanced option grew 7.4 per cent.

The worst performers highlighted in Stockspot's Fat Cat Funds Report, released today, were the Flexible Lifetime Super AMP Capital multi-asset option and One Path's Tax Effective Income option, returning just 1.2 per cent and 1.3 per cent respectively.

Stockspot CEO Chris Brycki said the cumulative difference between the best and worst funds over five years was 45 per cent, totalling almost $40,000 for an average 40-year-old saver.

He said fees and investment strategies had the biggest impact on super fund returns.

"Some funds charge half a per cent on your investments and some charge upwards of 2 per cent," Mr Brycki said.

"Lower fees equal better returns."

Mr Brycki said the high-performing ethical super funds had benefited from avoiding oil stocks in recent years, while AMP's fund struggled because it missed the boom in technology shares and was "chopping and changing" investments.

"They tried to outsmart the market," he said.

"We always tell customers the market's pretty smart, and if you are constantly trying to change the assets in your portfolio you are probably going to lose."

Stockspot prefers index funds, which are low cost and spread money over all shares rather than trying to pick winners, and it found indexing beats 90 per cent of all super funds.

"Owning everything is the way to guarantee you own the winning shares," Mr Brycki said.

Stockspot CEO Chris Brycki recommends investing in index funds. Source: Supplied.
Stockspot CEO Chris Brycki recommends investing in index funds. Source: Supplied.

Novo Wealth certified financial planner Paul Garner said sustainable super options had performed well because they generally invested in "well-managed companies" that treated employees and the environment well.

"However, when fossil fuels and resources are doing well, the ethical funds will lag," he said.

Mr Garner said it was vital for people to check their super.

"A big issue, particularly with younger people aged under 40, is they see super as something in the background and not of great interest," he said.

"But the biggest advantage they have got is time - if you can make a 1-2 per cent difference in annual returns, over the long term that will be a huge amount.

"Just a day's worth of attention could mean hundreds of thousands of dollars when you eventually retire."

Unlike many people aged in their early 30s, Nidhi Dattani takes an active interest in her super after switching from a retail fund to REST six years ago.

"I keep an eye on it because I have seen what an impact it makes," she said.

"Given I was burnt in the past and saw how much was taken out of my account for fees and insurance, I want to make sure that doesn't happen again."

 

Originally published as Worst fat cat super funds revealed



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