2018 Fat Cat Survey Results

Fat Cat Survey Results
 
In October 2018 Stockspot released its latest Fat Cat Funds report, for the first time we surveyed people who read the Report to find out how much they know about their superannuation.

Overall the results reiterate that super funds and the government need to do more to improve retirement outcomes.

Contents:

Key findings

Overall we found that Australians who are 40+ have less knowledge about how much super they have and where its invested. This lack of awareness is costing billions of dollars in excess fees and means that many more Australians end up on the age pension rather than being self-sufficient in retirement.

Fat Cat Super Survey
 

Industry funds and Self Managed Super Funds (SMSFs) make up the top 7 spots, showing that our survey respondents tend to invest with lower-cost options and avoid the retail funds whose high costs and conflicts of interests were exposed in the Royal Commission.

Fat Cat Super Survey
 

Younger Australians are more likely to be in an investment option that’s not appropriate for their time to retirement. Over 40% are in ‘Balanced’ funds (usually default options). It’s worth noting that many Balanced funds could be misleading about how much risk they take which is further adding to the confusion for young people.

Fat Cat Super Survey
 

People living in South Australia have the most knowledge about their super whereas Canberrans are the least engaged. Perhaps that’s why our politicians aren’t doing more to fix default super.

Fat Cat Super Survey
 

20s and 30s

Younger Australians are more engaged about who manages their super

It’s great to see that millennials appear to be paying more closer attention to their super. Those in their 20s and 30s have better knowledge of their fund and super balance when compared to the older generations.

Fat Cat Super Survey
 

Too many young people stuck in the wrong type of fund

The survey found too many young people are in the wrong type of fund. Forty percent said their super is in a ‘balanced’ fund, potentially missing out on $148,000 at retirement compared to being in a fund with a higher percentage of growth assets.

Our Fat Cat Report explains how we estimate the right mix of defensive and growth assets based on your age.

Fat Cat Super Survey
 

Three tips in your 20s and 30s

  • You have time on your side and can afford to take more risk, so you should. High growth and growth funds have the potential for higher returns.

  • Find a fund with low fees. High growth and growth funds with total fees of under 0.75% p.a. beat higher fee funds by around 0.70% p.a. Sure, it doesn’t sound like a lot, but over 30 years that could add up to hundreds of thousands in extra savings.

  • Look for a fund with good diversification across different countries and market sectors so you’re not too exposed to any one part of the global economy.

40s, 50s and 60+

The survey found older Australians are in the dark about where there super is invested with 1 in 5 (21%) not knowing what their super balance is.

This figure is concerning as this is the group of people really need to get engaged in their super to ensure they’re on track for a comfortable retirement by selecting the right fund and avoiding crippling fees.

Fat Cat Super Survey
 

Older Australians could be taking too much risk

Over 15% of Australians 60+ were in higher risk growth and aggressive investment options. These funds could be taking more risk than you need to take so it’s important to review whether you’re invested in an appropriate option for your investment horizon and risk capacity.

Fat Cat Super Survey
 

An aggressive/high growth fund should be expected to fall by 20% 1 in every 7 years. That’s a capital drawdown that many people approaching retirement wouldn’t be comfortable with.

Fat Cat Super Survey
 

Women are less likely to know their super balance compared to men

Retiring with less money than expected is an issue both genders face but it’s particularly important for women. It is a concern that a quarter (25%) of women did not know their super balance compared to 18% of men.

Three tips in your 40s and 50s

  • Growth and balanced funds are suited to most people in their 40s and 50s. Both have a mix of growth assets like shares with a higher potential for returns and defensive assets like bonds and cash to reduce the potential for large losses.

  • Find a fund with low fees. Growth funds with total fees of under 0.75% p.a. beat higher fee funds by around 0.70% p.a. Balanced funds with total fees of under 0.75% p.a. beat higher fee funds by around 0.40% p.a.

  • Look for a fund with good diversification across different countries and market sectors so you’re not too exposed to any one part of the global economy.

Three tips in your 60s+

  • Balanced and moderate funds are probably best for you. Both have more defensive assets like bonds and cash to smooth your returns and reduce the potential for large losses. This becomes more important as you approach retirement and once you’re retired.

  • Find a fund with low fees. Balanced and moderate funds with total fees of under 0.75% p.a. beat higher fee funds by around 0.40% p.a.

  • Be wary of funds with a high allocation to unlisted assets like direct property and infrastructure, as these can be difficult for the fund to sell if the market falls, which might be when you need the money.

How to find a great fund for all ages

Our advice to ensure you’re in a great super fund is to pick a fund that takes the right amount of risk for your age and to keep your fees below 0.75%.

For most people, we would suggest the below mix of investments provides the right balance to maximise long term returns, reduce short term risk, avoid regret (of losses or missing out on gains), keep up with inflation and increase certainty towards retirement.

Fat Cat Super Survey
 

Growth assets (typically shares and property) have the potential for higher returns over the long-run, however they come with a higher risk of negative returns in the short run.

Defensive assets (bonds and cash) provide more steady returns and help to cushion periods of negative share market returns when share markets dip.

Markets will go up and down, you need to accept some risk to reach your retirement goals. Our research shows that the type of assets chosen in your super fund drives the vast majority of returns. The actual shares chosen by a particular fund manager has minimal impact over time.

Early planning and engagement with your super can make a significant difference in boosting your retirement income to one that will sustain a comfortable and independent lifestyle.

We believe this is so important to Australia’s future that Stockspot made a submission to the Productivity Commission and Royal Commission’s investigations into super.

Our two key recommendations to government are summarised in this article.

If you have further questions about the survey results please get in touch.

 

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Stockspot is Australia’s largest and most experienced online investment adviser. We make investing easy and affordable. Whether you’re growing your wealth, saving for a home, a family or retirement, we help you do it with the right investment portfolio and guidance.

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