The importance of fees to superannuation fund outcomes has been underlined in the annual Stockspot review of after-fee performance in the sector. Good performance and low fees go hand in hand.
For its latest Fat Cat Funds Report, robo-advice provider Stockspot reviewed the performance (after fees) of 600 superannuation funds over the past five years.
The average fee for fund portfolio options that appeared in the top 10 in their category – the “fit cats” – was 0.93 per cent, while average fee for the weaker performers – the “fat cats” – was 2.07 per cent.
Stockspot chief executive Chris Brycki says: “The impact of high fees is more apparent every year as funds find it more and more difficult to generate strong returns to make up for the impact of those high fees.”
QSuper had nine top performing fund options over the five years under review, UniSuper had six and Australian Super had four.
At the other end of the scale, ANZ/OnePath has 11 poorly performing funds, AMP also had 11, Perpetual has four, and MLC and Zurich had three.
In the balance option category, where most super fund members have their savings, the average return of the top 10 funds was 7.7 per cent a year over five years. The average fee was 0.8 per cent.
Super funds in the top 10 for balanced options included QSuper, WA Local Government Super, Australian Super, UniSuper, AMG Super, IOOF and Bendigo Superannuation.
The bottom 10 balanced options had an average return of 3.9 per cent a year over five years, and an average fee of 1.8 per cent.
Super funds in the bottom 10 for balanced options included AMP, OnePath, Perpetual, MLC, Zurich and IAG.
In the growth option category, the average return of the top 10 funds was 9.4 per cent a year over five years, and the average fee was 1 per cent.
Super funds in the top 10 for growth options included HESTA, QSuper, Australian Super, UniSuper, MTAA Super and Statewide.
The bottom 10 growth options had an average return of 4.6 per cent a year over five years, and an average fee of 2.4 per cent.
Super funds in the bottom 10 for growth options included AMP, OnePath, Perpetual, and Zurich.
Overall, there was a clear difference between industry funds and retail funds on fees. The average industry fund fee was 30 per cent lower over the survey period than the average for retail funds.
The results of the Fit Cat Funds Report support the findings of the Productivity Commission in its landmark report on super this year. It says fees are a key determinant of long-term outcomes in super.
The report says: “Australians pay over $30 billion a year in fees on their super (excluding insurance premiums). An increase in fees of just 0.5 per cent can cost a typical full-time worker about 12 per cent of their balance by the time they reach retirement.”