YOUR QUESTIONS

I am a 64-year-old permanently disabled person with no debt. I have $25,000 in a OnePath allocated pension and $30,000 in a Colonial First State (CFS) superannuation fund, both "nil entry fee". The latter is invested in the conservative, balanced, diversified property securities and income options with $360 in management fees on the last statement. The ongoing high management fees and uncertainty of the market is a concern. I've been considering taking all the super out and putting it in a bank term deposit, where it's hopefully safer without high fees. R.B.W.

"Nil entry fee" funds were, in fact, a deceptive misnomer and one of the least-attractive inventions of the managed-funds industry. While they eliminated the entry fee, usually about 4 per cent through the 1990s, they replaced them with higher annual and exit fees.

Your ING (OnePath) nil entry fee fund has an additional annual fee of 0.75 per cent but ameliorates it by rebating the full 0.75 per cent after the first four years, in the form of additional units credited to your account. Thus you end up paying an entry fee of about 3 per cent.

The old CFS nil entry fee alternative, which is no longer offered, had an additional annual fee of 0.44 per cent.

Nil entry fee funds, when structured in this manner, are usually not good long-term investments. You may be better able to preserve against loss of capital in a term deposit but you may find the switch will affect any disability pension you receive, so you need to check this aspect before doing anything. Also, check to see if the move will result in a higher tax liability.

You may be better off just rolling the money over into a single fund offering a fixed interest rate. One of the highest such funds is the Defence Bank Retirement Savings Account, offering a term-deposit structure and currently offering 5.35 per cent for six months and 5 per cent for 12 months.

If you have a question for George Cochrane, send it to Personal Investment, PO Box 3001, Tamarama, NSW, 2026. Helplines: Financial Ombudsman, 1300 780 808 pensions, 13 23 00.