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SMSF not a super idea for some

You might be able to have a fund wound up and benefits rolled over, writes George Cochrane.

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.


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