Explaining the super fund puzzle

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Greg is closely following the performance of his super fund now that he is retired and asks personal finance expert Noel Whittaker for help on how to assess funds.

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Q. Greg
I always enjoy your articles. My wife and I retired last year (aged 63) and we live off our $830,000 through the super fund BUSSQ. Their returns are always in the top 20 funds, but I also note that the Hostplus indexed fund wins the gong every year with returns of 12 per cent plus and low fees. I wonder: would I lose too much money swapping over to them? It’s really hard to obtain reliable information on funds as there are so many variables in the data.

A. As you point out, there are many variables when you try to compare one fund with another. Usually, the main factor that influences returns is asset allocation – some investors choose a more conservative asset allocation than others, and some funds invest a greater proportion of their assets in unlisted assets such as infrastructure.

I think the important thing is to sit down with your adviser and choose an asset allocation that suits your goals and your risk profile. That way, you can more accurately assess other funds and ensure that your returns match your particular goals.

Do you have a question you’d like Noel to tackle? Email us at [email protected]

Noel Whittaker is the author of Making Money Made Simple and numerous other books on personal finance. His advice is general in nature, and readers should seek their own professional advice before making any financial decisions.

Disclaimer: All content on YourLifeChoices website is of a general nature and has been prepared without taking into account your objectives, financial situation or needs. It has been prepared with due care but no guarantees are provided for the ongoing accuracy or relevance. Before making a decision based on this information, you should consider its appropriateness in regard to your own circumstances. You should seek professional advice from a financial planner, lawyer or tax agent in relation to any aspects that affect your financial and legal circumstances.

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Written by Noel Whittaker

16 Comments

Total Comments: 16
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    Dear Mr Whittaker, in YOURLIFESCHOICES ISSUED ON 31.10.19, Mike wrote to you about the high fees charged by his super fund, but you really didn’t answer his question.
    I note that Stateplus charges an admin/management fee of about .7% and an (optional) advice fee of about .83%, both of which are way too high, so I’ve just opted out of the advice fee.
    ‘However, these fees combined would have chewed up about $100K out of my fund over the first ten years of my retirement, which amounts to about 3-4 years of extra retirement funding.
    These fees are exhorbitant and amount to daylight robbery, yet the government lets these super funds get away with it. They just let the big end of town gouge members in these super funds.
    My funds are not there for this type of exhortion…
    What do you say Mr Whittaker . I notice you didn’t address this issue in you comment re Mike above.

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      I agree some funds charge like wounded bulls but the super fund you choose to put your money in for pension phase is up to you. You had a choice so isn’t it reasonable that the onus is on you to check out all the super funds and find one that you believe to have the best administration fees etc that will not gouge you? It’s the biggest pay out most of us will ever have so you have to be vigilant yourself and not just go along with the advisers who work for specific companies and are trying to sell their particular products to you. Do you buy a car or a house the same way and just listen to one person and do no research? Lots of homework needs to be done by yourself before entering in to locked in pension super funds.

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      Thank you Seadove, I hope you have a good day too

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      Pretty hard to find the info & compare it, not to mention time consuming when you still work full time (shiftwork to boot). I’m pretty sure I’m losing a lot of money in my fund to fees & admin charges, etc but how do you compare these with other funds to know if they are “normal” or “fair” etc without moving the money to find out? How do you find a fund that provides the best return with the confidence to know you are getting the info you require or comparing apples with apples so to speak. And how does one decide if to invest in the riskier options & get higher interest or to stay in the safe ones & not “lose” money when they fall flat (need a crystal ball)> I’m hoping to raid my super (quit work/change jobs/retire/get retrenched, whichever comes first in the next couple of years as job is becoming physically & mentally too hard for me at 57… no one can tell me what I should do, the decision is all mine & it is tough (I do not have massive amount of super but of course want to stretch it as far as possible & not get ripped off, like anyone else!

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      All super funds have to list their fees on their web sites so you can find out admin and investment fees through this. You most certainly would not go for a retail super fund as they are blatant ripoffs so look for industry funds. Also you have to see if you can get a reasonable return on your money which you won’t get if you park it all in cash. If you can afford it,look for an independent financial adviser not tied to any company or products and see if they can assist you. They are around, just not too many of them. Try http://www.canstar.com.au and see what they might come up with for you.

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    Noel Whittaker’s answer to the question re swapping super funds
    A. As you point out, there are many variables when you try to compare one fund with another. Usually, the main factor that influences returns is asset allocation – some investors choose a more conservative asset allocation than others, and some funds invest a greater proportion of their assets in unlisted assets such as infrastructure.

    I think the important thing is to sit down with your adviser and choose an asset allocation that suits your goals and your risk profile. That way, you can more accurately assess other funds and ensure that your returns match your particular goals
    HOW LAME! Too often this newsletter dishes up simplistic “advice” that does not answer the question or provide quality information

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      This is ok parco if you have an advisor you can trust who is showing all options that are suitable & not just the ones that line the advisor’s pockets instead of yours…how do you find this type of advisor?

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      Agree with you Cheezil61…with minimal super, and wanting to make the best selections, the quotes I was given were just mind boggling! Sometimes I wonder if they quote people with smaller amounts, huge fees in order to scare them off. That the adviser only wants people with big bickies…

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    I was looking forward to a more “substantial” reply from Mr Wittaker too. I’ve often read the Barefoot Investor praise the Hostplus Index Fund too & wondered about the cost of maybe transferring my super which is in pension mode to Hostplus. Guess one simply needs to ask Hostplus & one’s fund. I remember paying around $3,000 formy pension account to be set up. If returns are much better then this might not be a bad idea.

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      Just check first. If you were getting the old age pension before 1 January 2015 then you are under granfarhered rules and your super isnt treated as an asset. If you start with a new fund it will be

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      Sorry Sundays, your super is treated as an asset up to and after 1.1.15. However, the deeming rules are different after 1.1.15, but if you are assets tested (for the AP), apparenlty you won’t be adversely affected by that change to the deeming provisions.
      Please let me know if I’am wrong..

  4. 0
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    Yes disappointing that Noel sidestepped the question and made himself sound like a politician than the respected commentator I know he can be.
    How often have I heard commentators breezily say in answer to an sincere question about their super to “consult your financial advisor ” as if we all such thieves on speed dial.
    So many super questions I see in financial pages addressed to others experts concern individuals with huge sums often looking for advice on how to rig the system so that they can get access to pension entitlements they obviously don’t need.
    As most people’s super is average $350,000 or less why not have much more articles in this newsletter that helps them directly and more brave commentators like the barefoot investor helping and advising the majority of people and calling out the outrageous scams that have blighted the super industry for way too many years.

  5. 0
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    Does Noel Whittaker ever answer the question??
    Again another answer that doesn’t answer the question.
    Go and see your advisor is a non answer.

  6. 0
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    HostPlus Indexed Balanced fund has the lowest fees (0.7% per annum + a very small admin charge) Noel is correct in stating that asset allocation influences returns, but fees have a greater effect on return. I transferred to HostPlus from a big 4 retail fund without any concern and reduced my annual fees by 700%


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