Superannuation Panic

[Lurkin]

Good morning all!

I'm new to Australia and have noted that there is compulsory superannuation. Subsequently I am trying to figure out which fund/ type of fund will be appropriate to invest it into, and have a few further queries as well:

- of the different funds types (retail, industry etc) it appears that industry will be the most appropriate (too small for SMSF, after the lowest fees thus out goes retail, not a government employee there goes public, employer fund - appears like investing proceeds from employment with an employer = higher risk, wrap platforms loss too much control) as it will offer low fees, an average return etc.

I'm not worried about a return as this will act as the 'floor' of an overall portfolio.

(at a later date when there is more in it I will be more interested in switching to a SMSF)

(1) From googling/ reading other material, it sounds like CareSuper is an option - I am looking for an industry fund appropriate for a professional? Can anyone suggest alternatives that are worth considering?

(2) how long do I have to make this decision?

(3) are co-contributions available to permanent resident NZers? ATO comments on temporary visas - I am here permanently? (so right now I think this is a yes?)

(4) should I be considering APRA funds? how to they work?

NB I am not looking for advice, or 'the answer' and I have attempted to answer these questions myself already. Not afraid to read up more/ deal with jargon etc as I have worked in superannuation in NZ before thus should be relatively easy to figure out.

 

[Garpal Gumnut]

fwiw


1. Avoid industry funds, set up your own self managed super fund, depends on your earnings and size of super contributions, otherwise go with a leader e.g Sunsuper.

2. You have as far as I know and I'm not an accountant until 30th June 2012.

3. Ask an accountant

4. Ask an accountant

Also there are numerous "advisers ", some of whom are still employed in the financial press who will assist you in setting up your own self managed super fund SMSF.

gg

 

[Lurkin]

(1) why? it will be starting from scratch with no where near enough in it to cover the cheapest fees I can find? (500 - 600 pa). this is why I am more interested in a managed fund, and I thought CareSuper is a leader?

(2,3,4) I am an accountant.... and I am uninterested in getting an adviser. Literally just looking for the answers to these queries/ interested in what others think.

 

[sptrawler]

(1) why? it will be starting from scratch with no where near enough in it to cover the cheapest fees I can find? (500 - 600 pa). this is why I am more interested in a managed fund, and I thought CareSuper is a leader?

(2,3,4) I am an accountant.... and I am uninterested in getting an adviser. Literally just looking for the answers to these queries/ interested in what others think.

Check esuper fees, if you decide to start your own fund. I don't use them but people say they are worth checking. By the way no one on the forum can give financial advice. Do your own research.

 

[Garpal Gumnut]

(1) why? it will be starting from scratch with no where near enough in it to cover the cheapest fees I can find? (500 - 600 pa). this is why I am more interested in a managed fund, and I thought CareSuper is a leader?

(2,3,4) I am an accountant.... and I am uninterested in getting an adviser. Literally just looking for the answers to these queries/ interested in what others think.

If you are an alien, you need an Australian accountant, even if you are an alien accountant.

gg

 

[Smurf1976]

I'd go with one of the majors for now. You can always open a new account and move your money once you've sorted out exactly what you want.

 

[tech/a]

No matter how well most think they can invest in super the sad fact is that they will need a passive income in retirement to live an existing quality of life.

Inflation and increased cost of living will evaporate and absorb savings for those who survive beyond 10 yrs. of retirement

So more importantly in my view is setting up a passive income source.

 

[Lurkin]

Is CareSuper considered to be one of the larger Supers? I think I will just go with a industry fund for the time being, and as suggested move to self managed once I have more cash/ know more about them/ more confident with what to do with it to make $$$!

 

[Junior]

The below are my thoughts on these issues, and should not be construed as financial advice.


(1) From googling/ reading other material, it sounds like CareSuper is an option - I am looking for an industry fund appropriate for a professional? Can anyone suggest alternatives that are worth considering?

I see no issue with one of the large industry funds until you get a sufficient balance for SMSF. Australian Super isn't bad. Low cost and offers all the features you could desire; plenty of investment options, direct shares, insurances etc.

(2) how long do I have to make this decision?

Your employer will establish a super fund with their preferred provider for you shortly after you commence employment, unless you establish your own account and then provide them with the details.

(3) are co-contributions available to permanent resident NZers? ATO comments on temporary visas - I am here permanently? (so right now I think this is a yes?)

Double check this, but I think you may be eligible for co-cont as an NZ citizen, providing you meet the other criteria.

(4) should I be considering APRA funds? how to they work?

Don't know much about these...I don't think there's any reason to stray from industry, retail or SMSF.

 

[Knobby22]

Care Super been really good.
Australian Super has been nearly as good.

You don't have to go the SMSF route and pay advisors, accountants etc. The advantage of an Industry superfund is that you leave it to others and get on with your life. To me it becomes the conservative stable base of future retirement funds that you can't get till your quite old. It provides investing with a wide spread of the world economy that is difficult to do as an SMSF. Do your other investing outside this where you can take more risks and use the money for making your life better while you are not too old.

I know a couple of people who did SMSF who have blown up their savings and have angry wives. Personally, I don't want the stress.

 

[Lantern]

Latest performance figures.
Hope this helps.


http://images.smh.com.au/file/2011/11/19/2784087/7-year-super.docx

 

[waimate01]

Do your other investing outside this where you can take more risks and use the money for making your life better while you are not too old.

I must say I agree with this sentiment. I've never understood why people are in such a headlong rush to go SMSF.

Control? Do people really think they are such savant investors that they will, untrained and part-time, exceed the performance of full-time professionals?

Fees? There are plenty of reasonably-priced alternatives.

Freaky stuff? Having your SMSF invest in a painting which hangs above your fireplace and can enjoy looking at even though you are not yet 55. Having your SMSF invest in a unit your son lives in... all these things seem to be not investment choices.

I agree with Knobby22. Do your investing in addition to super, and let someone else manage your super. That way, if it turns out you are not the investment superman you hope you are, your future is still assured. It's a plan B. Plan A is that your investments outside of super turn out so well that your super becomes insignificant.

Diversification is good, and diversification of investment manager is equally valid.

 

[Julia]

I know a couple of people who did SMSF who have blown up their savings and have angry wives. Personally, I don't want the stress.

Don't blame the SMSF structure for that! These people clearly didn't know what they were doing and would have lost money whether investing inside or outside Super.

I must say I agree with this sentiment. I've never understood why people are in such a headlong rush to go SMSF.

Control? Do people really think they are such savant investors that they will, untrained and part-time, exceed the performance of full-time professionals?

Yes, absolutely. And most of us do.
I heard a report yesterday that the best of the public super funds' performance over the last five years has been around 6% and only a few of them achieved that.

You refer to people with SMSF as untrained. It doesn't take a degree in finance to understand how to manage money or learn when to be in the market and when to leave it alone.

And yes, the control issue is big. I don't ever want someone else controlling my funds. No one has as great an interest in looking after them than I do.
I've had a SMSF for about eight years and am way ahead, despite taking a living from it.

Fees? I pay around 0.2% of the fund's balance p.a. for tax return and audit and then there's a fee to ASIC of, I think, about $40 or $50.

Freaky stuff? Having your SMSF invest in a painting which hangs above your fireplace and can enjoy looking at even though you are not yet 55. Having your SMSF invest in a unit your son lives in... all these things seem to be not investment choices.

I don't do anything like this, but can't see why it's not a good idea. If either the painting or the unit has the potential to offer capital growth and the unit in the meantime is deriving income, what's the problem if the law allows it?

Remember that "Super" is simply a tax advantaged vehicle for investments, not an investment of itself. If you have sufficient skill to make money outside of such a vehicle where you're likely paying the top tax rate, surely it makes sense, unless you're very young, to do that investing where the tax is only 15%.

Don't depend on "the professionals" to always act in your best interests. Learn how to do it well yourself.

 

[tech/a]

I must say I agree with this sentiment. I've never understood why people are in such a headlong rush to go SMSF.

Control? Do people really think they are such savant investors that they will, untrained and part-time, exceed the performance of full-time professionals?

Fees? There are plenty of reasonably-priced alternatives.

Freaky stuff? Having your SMSF invest in a painting which hangs above your fireplace and can enjoy looking at even though you are not yet 55. Having your SMSF invest in a unit your son lives in... all these things seem to be not investment choices.

I agree with Knobby22. Do your investing in addition to super, and let someone else manage your super. That way, if it turns out you are not the investment superman you hope you are, your future is still assured. It's a plan B. Plan A is that your investments outside of super turn out so well that your super becomes insignificant.

Diversification is good, and diversification of investment manager is equally valid.

SMSF

Best thing I ever did.
Hold Business Property and Pay myself rent.
Massive benifits particularly initially when we could place $ 100 k each a year.
The tax advantages far outweigh investment outside of Super.
Sure have them but dont under estimate SMSF particularly in the hands of experts---If your in a position like myself.
Did and still do through our accountant.

 

[robz7777]

Freaky stuff? Having your SMSF invest in a painting which hangs above your fireplace and can enjoy looking at even though you are not yet 55. Having your SMSF invest in a unit your son lives in... all these things seem to be not investment choices.

Pretty sure these are breaches of the SIS act.. If they were audited the accountant (if any) would be in some trouble as the members would lose their tax concessions..

 

[Julia]

Pretty sure these are breaches of the SIS act.. If they were audited the accountant (if any) would be in some trouble as the members would lose their tax concessions..

I'm not sure about the issue of the relative living in the investment property, but the SMSF can certainly invest in property.
Ditto Art/Collectibles, within certain conditions.
http://www.thesmsfreview.com.au/i-collectables.html

 

[matty77]

I am with Australian Super and they have been pretty good.

Their fees can be quiet high though, and they look considerably higher when you lose money and they still sting you - however I am now 100% in cash for my super at the moment until GFC2 has finished.

 

[Lurkin]

Hi all,

Thanks for the replies, great to have your input.

In the short run I have decided to go with CareSuper. Its quick, relatively cheap, doesnt require active management and doesnt require capital start up to justify it.

I will definitely be interested in SMSF in the future, however as I understand the benefits of it - just dont have time to sort it at the mo (I have just moved countries!)

Julia, thank you for posting, was kinda hoping you would as I have been reading some of the other posts and I am very interested to know more about how you have achieved the low cost SMSF - it would be great if you could let me know more about this, feel free to PM if it would be more appropriate.

*For the record I have a finance degree with postgraduate study in Accounting -> I am not doing this through ignorance/ lacking in investment skill (I have other investments in NZ that are not managed funds), but I would like to know more about investing in Australia and the different options available here before taking the SMSF leap.

 

[So_Cynical]

Care Super been really good.
Australian Super has been nearly as good.

I am with Australian Super and they have been pretty good.

On the 28th of This month AustSuper will launch there new Member Direct investment option, allowing members the option of direct investment into the ASX300 and the full range of IShare ETFs, this is a whole new platform featuring daily trade settlement and an interest paying trade settlement account.

Many of the features of a SMSF but without the extreme costs and paperwork.

Read on http://www.australiansuper.com/memberdirectguide

 

[Lurkin]

CareSuper already has something similar, but I think its limited to 50%.

Again, they have mentioned a threshold of 10k odd before considering it - as there is still brokerage fees to consider... which are on top of administration fees..

not really there yet - I think I will be more interested in a strong self management scheme in 12 months or so, to allow time to research (and talking to others in the firm, probably the best source!).