You might be able to have a fund wound up and benefits rolled over, writes George Cochrane.
IN 2005, a financial planning company advised me to take out a "superannuation trustee fund" and, to this day, I never fully understood why. My legal adviser investigated my files and concluded I had been given poor advice. In July 2010, I tried to recover my investments and discovered the three investments in the trustee fund were in a stage of liquidation and frozen. Three investments involved are Riverside ($35,000), Gilead ($34,000) and Prime ($34,000). In March, I received a letter from Sheridan, the liquidator, saying there was no chance of recovering any part of the first two. As you are aware, any trustee account requires an audit every year costing $2500 to pay a $50 tax bill. Given this loss has resulted in me trying to survive on a single age pension of $620 a fortnight, there is no way I can pay such an amount for an audit each year. Can I seek an exemption or relief from audit costs? I.C.
By "superannuation trustee account", I gather you mean a "self-managed superannuation fund", or SMSF. Your situation reinforces something I have often said, that an SMSF is really only suitable to people who have experience in running portfolios and who want to continue to do so through retirement. There is a possibility you are still involved in legal matters, which might require you to keep your SMSF operating. But, if you are not, you should simply instruct your accountant to wind up the fund as soon as possible and roll over your benefits to a public super fund. Otherwise, look for an auditor who charges less.
Good advice critical
I AM a little confused as to what to do with my super. At present, I am with Ipac Pathways 70 and 85 and Australian Shares, Platinum Asia and International. I invested in 2007, just before the crash, and they are struggling to get back to my original investment of $500,000. I am also in Hesta for work, which has a very low balance of $25,000. Should I consider moving all of Ipac over to Hesta, an industry fund, or hold tight? There is a significant fee to pay with Ipac which, I believe, is eating away at the investment. I am nearing retirement, nearly 64, and only work part-time. I have no debt and own my home. L.R.
I've often pointed out that fees are really only one aspect of the return on an investment and a low fee doesn't necessarily mean a high return. That said, if two funds invest identically, then, yes, the fund with lowest fees will produce the higher return. To my knowledge, no funds offered by competing fund managers invest identically.
None of your funds supply figures to SuperRatings' monthly survey so, using figures taken from their respective websites, Hesta's Core Pool fund earned 10.1 per cent over the past year, versus Pathways 70's return of 9.96 per cent, so there's not much in it there. In a clearer comparison, Hesta's Australian Shares fund earned 14.5 per cent against Pathways Australian Shares' 10.6 per cent. With regard to Platinum, I'm not a fan of overseas shares, which have generally not returned as much as local share funds over many years. If you feel you're getting good advice as part of the Ipac package, stay where you are. If not, try Hesta but first determine what level of advice you need and the cost.
If you have a question for George Cochrane, send it to Personal Investment, PO Box 3001, Tamarama, NSW, 2026. Helplines: Banking Ombudsman, 1300 780 808 Pensions, 13 23 00.
Frequently Asked Questions about this Article…
What can I do if SMSF investments have been liquidated and the liquidator says I can't recover them?
If a liquidator (for example, Sheridan in the article) has told you there’s no chance of recovering some investments (like Riverside or Gilead in this case), recovery is unlikely. The article recommends checking whether you remain involved in any legal proceedings that require the SMSF to stay open. If not, instruct your accountant to wind up the SMSF and roll your benefits into a public super fund. Also get legal and financial advice about any possible recovery options before you close the fund.
Can I get an exemption from annual SMSF audit costs if I can't afford the $2,500 audit?
The article does not describe any formal exemption from the annual SMSF audit requirement. Instead it suggests two practical options: if you no longer need the SMSF, have your accountant wind it up and roll your benefits into a public fund to avoid ongoing audit bills; or look for a different auditor who charges less. You should discuss your situation with your accountant or legal adviser.
Is a self-managed super fund (SMSF) suitable for everyday investors?
According to the article, SMSFs are generally suitable only for people who have experience running investment portfolios and who want to continue managing investments through retirement. If you don’t have that experience or the desire to manage investments, a public or industry super fund may be a better option.
Should I move my Ipac Pathways super to Hesta because of fees and performance?
The article notes fees are only one part of investment return. Using published figures, Hesta’s Core Pool returned 10.1% over the past year versus Pathways 70’s 9.96%, and Hesta’s Australian Shares returned 14.5% versus Pathways Australian Shares at 10.6%. If you feel you are receiving good advice from Ipac, staying may be fine. If not, trying Hesta is reasonable, but first confirm the level and cost of advice you need and compare investment options and fees before switching.
Do lower superannuation fees always lead to better investment returns?
Not necessarily. The article explains that fees are only one aspect of return—low fees don’t automatically mean higher returns. However, if two funds invest identically, the fund with lower fees will produce the higher net return. Always compare both fee structures and investment strategies.
Are overseas share funds better or worse than Australian share funds?
The author says he is not a fan of overseas shares for many investors, noting that overseas share funds have generally not returned as much as local Australian share funds over many years. That doesn’t rule out using international exposure, but it’s something to consider when building a portfolio.
What should I consider before winding up an SMSF and rolling benefits into a public super fund?
Before winding up, confirm whether any ongoing legal matters require the SMSF to remain open. If not, tell your accountant to wind up the fund and roll the benefits into a public or industry fund. Also factor in audit and administration costs, compare investment performance and fees of the receiving fund (for example Hesta vs Ipac figures shown in the article), and get professional advice on tax and rollover implications.
Where can I get help or more information about superannuation or financial complaints?
The article lists helplines and contact options: Banking Ombudsman 1300 780 808 and Pensions 13 23 00. You can also send questions to the Personal Investment column (George Cochrane) at Personal Investment, PO Box 3001, Tamarama NSW 2026, as noted in the article.
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