THIS NEW PRODUCT OFFERS A FEE-FREE BALANCED FUND PLUS THE ABILITY TO TRADE SHARES, REPORTS JOHN KAVANAGH.
What is it? Retail bank ING Direct has entered the superannuation market with a fund named Living Super. ING Direct has operated in Australia as a branchless retail bank since the mid-1990s, offering home loans, savings accounts, term deposits and transaction accounts. It is Australia's fifth-largest home lender. The bank provides its existing services online and through a call centre, and will provide access to its new product in the same way.
How it works Living Super has been designed to meet the needs of super fund members in the accumulation phase and in retirement. It has four portfolio options: cash and term deposits balanced a range of managed investment options, such as Australian shares, international shares, growth and high growth and a direct share-trading option.
There are no fees on the cash and term-deposit option or the balanced option. There is a buy-sell spread charged for transaction costs in the balanced option.
The managed investment option, Select, has an annual administration fee of 0.5 per cent of the account balance and an annual management fee of 0.25 per cent of the account balance.
The shares option has a $15-a-month administration fee. Share trades cost $20 or 0.13 per cent of the value of the transaction (whichever s higher). Research is available for $20 a month.
Members can buy insurance through the fund - death cover, income protection, and total and permanent disability.
Cover is offered in one of three ways: life stages adjusts the level of cover and the premium with the member's age fixed cover is adjusted by the lesser of the change in the consumer price index, or 5 per cent each year and fixed premium cover, where the premium does not change and cover is adjusted accordingly.
Pros The most obvious benefit is the option of investing in cash or a balanced portfolio and having no establishment fee, termination fee, management fee or administration fee. In its promotional material, ING Direct cites research by SuperRatings to support its claim that it is the only fee-free balanced fund in the market. Investors can't control the direction of the markets, but one thing they can control is costs.
Another benefit is the ability to trade shares directly. That option is usually only available on high-cost wrap accounts.
Share trading is conducted in real time and the broker is Core Equity Services, a Commonwealth Bank division.
ING Direct has adopted a popular feature from BT's Super for Life, which allows fund members who are also Westpac customers to have their bank account and super account details available with a single log-on.
ING Living Super members can see their super balance alongside their existing bank accounts when they are doing online banking. Members will be able to use the online service to make contributions, switch between investment options, update personal details, buy insurance and trade shares.
Cons Share trading is limited to companies in the S&P/ASX 200 index, 40 exchange-traded funds and 13 listed investment companies. While this will be enough for most investors, some may find it restrictive. Another limitation is that direct shares can only make up 50 per cent of a member's total account balance.
The maximum investment in any
one stock is 20 per cent of the total account balance.
The balanced fund has an unconventional asset allocation. The target allocation is 30 per cent Australian shares, 10 per cent international shares, 10 per cent hedged international shares and 50 per cent cash. No property, no alternatives and no fixed income (the fund can hold up to 10 per cent fixed income but the target is zero).
One reason for this unusual asset allocation is that it directs a lot of deposit flow to ING Direct, which will manage the cash component. The head of super at ING Direct, Michael Christofides, says the bank has had the balanced option tested and it has produced above-average results over the long term.
ING Direct Super Living