Alarming findings from the 2015 Stockspot Fat Cat Fund Report have estimated that 50 per cent of Australians under the age of 40 who are currently with a ‘Fat Cat’ superannuation fund won’t have enough money to fund their own retirement.
‘Fat Cat Funds’ are funds that upon comparison have consistently performed worse than their peers in most cases due to high fees that significantly impact the amount of money customers will be left with upon reaching retirement age. These customers are more likely to have to rely on receiving the age pension to make ends meet when they retire.
Super funds owned by the big four banks or AMP made up 72 per cent of ‘Fat Cat Funds’ while, on the other end of the spectrum, one of the top performing super funds was Retail Employees Super Trust (REST).
With the population of Australia aging and life expectancy increasing, the prospect of a large portion of Australians being reliant on the age pension is a scary one to face. This year will see the fith wave of baby boomers turning 65 and qualifying for pension payments and currently 3.4% of the population are over the age of 65 according to the ABS.
“It’s terrifying to think that most 30 year olds will not be self-sufficient at retirement,” said Chris Brycki, CEO of Stockspot and driving force behind the 2015 Stockspot Fat Cat Fund Report.
“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’. Switching to a fund charging 0.5 per cent a year in fees could mean that same couple has $35,261 each year, or 52% more to enjoy when they retire.”
Current research from Roy Morgan also highlights the concerning trend of unpreparedness for retirement, showing that half of men in the 50 to 64 age group have super balances of less than $197,000 and half of women have balances less than $108,000.
“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 per cent or less, giving all age groups a much better chance of having an adequate super nest egg at their disposal,” concluded Mr Brycki.
One of the best ways to see if your fund is performing well is to compare it with other funds on the market. When doing so, some things to consider include the ongoing fees charged, any exit fees for leaving your current fund, benefits you may lose if you switch such as life and disability insurance or income protection, other product features, available investment options, any employer requirements as well as the fund’s performance over the past five years to give you an idea of long term performance. To compare your superfund visit the RateCity superannuation comparison page.
Advice contained in this article is general in nature and not specific to your particular circumstances. Before making an investment decision you should consider your own financial situation and the relevant Product Disclosure Statement/s. We also recommend you seek advice about your own particular circumstances from a licensed financial adviser. Further information on superannuation can be found at: https://www.moneysmart.gov.au/superannuation-and-retirement. Past performance is not a reliable indicator of future performance.