Tuesday, 12 December 2017

I Nearly Set Up A SMSF





Hi folks

I have been dead keen to set a up SMSF (Self Managed Superannuation Fund) and have been doing oodles of research about it.

I will not bore you with all the dry details but instead will just chat briefly about why I didn't .... yet.


Why I did not set up a SMSF

1. Primarily, the sheer ongoing time and effort required to manage, research, ensure auditing and taxation requirements are correct and timely looks like an enormous time-sucking commitment to me. I'm just not that keen.

2. The fees, even using the cheapest and fairest SMSF Administration company I could find (GreenFrog Super) are far in excess of the fees we currently pay for two individual Hostplus Super Funds including fees for the Choiceplus share trading platform for each.  However, can I say that if you were seriously thinking of using a SMSF Admin company, then GreenFrog appears to have the most flexible and best priced product I can find in Australia at time of writing. (No, I'm not getting paid by GreenFrog, Hostplus or Choiceplus to say any of this).

3. I have no plans to invest in physical property via Superannuation......yet. I am happy with the zero-fuss Real Estate Investment Trust ETF I invest in via Choiceplus - it sure beats chasing tenants for rent and fixing leaking roofs!  However, if I do decide to invest in physical property via Super' then a SMSF  will certainly be the way to go as I cannot do this via Hostplus or Choiceplus.

Setting up a SMSF with the help of your solicitor, accountant and bank would be the cheapest SMSF option in the long run. You would not want to factor in the cost of your own time however - fully self administered SMSF's can be a huge time commitment to accurately kept abreast of all the tax rules and legislation knowledge required. The ATO is very unforgiving of poorly run SMSF's and have no qualms in whacking hefty fines on inaccurate operators.

The next best option would be to set up a SMSF via an independent SMSF administration company who does the set-up for you and also does the yearly reporting and auditing for you too......all for a fee of course. If and when I do set up a SMSF, I would go with the likes of GreenFrog who have transparent and fair flat fee structures and allow you 100% flexibility on every part of your SMSF. (Beware the SMSF Administrator who only allows you to use certain banks, certain trading platforms and products - a probable sign of hidden fee kick-backs and lack of true independence).

If you are not investing in physical real estate properties, then sticking with a very low fee Superannuation company that offers a low fee stock trading platform is the best option by far.  This is what I'm sticking with unless I get lured into buying physical property as a Superannuation investment. (BTW, there are other excellent structures to own investment property within besides Super - a topic for another time)

Yet again, I am not a financial adviser so everything you read here please do your own research on first. I write to encourage folk to get interested in investing and to break the stupid taboos around not talking openly about money.

Take care and stay nice folks

Mr HM (Phil)

13 comments:

  1. I did some research and decided the same. Also habe some conspiracy theories about the fees are so high...

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    1. Same Liz - conspiracy theories abound here too, but if my employer is paying into Super by law, I am going to control it the best I can.
      I am very worried about future legislation.

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  2. I've just wound up my SMSF and transferred it to Hostplus. I used esuperfund and they were excellent - very reasonable fees and very easy to manage the paperwork. I did quite well with it over but decided to change mainly because my hubby has no interest in managing it if something happened to me in the future & the hostplus results are very good for no effort on my part. I didn't find the paperwork onerous but I do think it depends on the individual and being prepared to research stocks etc. Its one less thing to have to worry about.

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    1. Yes, I have heard good things on some forums about esuperfund as a SMSF Administrator. Using an Administrator certainly makes it infinitely easier than doing the whole thing yourself. Good point about ensuring both parties are keen to run a SMSF - I had not even thought about that risk.

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  3. We have just pulled out of private health insurance (I will do a post on the why's later) and we are going to start our own type of health fund, I was going to email you soon to ask where to start looking for a fund that returns more than bank interest, but is easy to get cash out of to pay for medical expenses. It will be a long term plan, I don't want major returns on it, I just want a nest egg to pay for medical. There is so much to learn, know and consider when managing anything financial on your own.

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    1. Both ME Bank and ING are offering online bank accounts paying a whisker under 3%. that is about as good as it gets in bank world. Or you could try Acorns - you will have to be OK with the constant fluctuations with Acorns and think long term, however over the long term the share market via Acorns will return a better outcome. We self-insure too.

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  4. PS Your Acorns post pipped my interest for this plan, what do you think?

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    1. Yep - absolutely. But fully read the Product Disclosure statement and be prepared for daily fluctuations .... thats all very normal for investing in the stock market. Your money is fully accessible in three working days with Acorns.

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    2. Thanks Phil, I'm definitely looking into it.

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  5. Very timely post Mr HM as I'm about to switch to the income stream with my Host Plus super from my employer (while I was in the work force), and have been researching heavily about the best way to go. I read that Host Plus is getting better returns than SMSF. Even though I thought the fees were still quite high, there doesn't appear to be much alternative. What are your thoughts on ING Super? Still the skeptic on Super, but I understand the tax benefits and tax free income stream, so I wonder your thoughts on adding a lump sum to my super before I change it over to income stream? Or should I buy more shares, bearing in mind that I'll be taxed on the dividends if my income goes above the allowable tax free threshold? Sorry for so many questions, but I value your opinion.

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    Replies
    1. Firstly, congratulations on transitioning across to retirement. There are a few factors to consider. 1. The returns quoted by Hostplus are those from their balanced fund which has significant underlying fees. 2. The fund you need to choose in Hostplus is their INDEXED balanced fund which has underlying fees of less than 0.1% - a huge difference. The standard fee for Hostplus pension accounts is $7.50 per week plus the underlying fees of you total investments. These fees are quite transparent. 3. ING super is a good product too but promise me you will read the PDS in full till you fully understand the fee structure (you might be surprised). 4. If you have investments outside of super, the earnings on these will not necessarily be tax free like they would be inside a Super pension (depending of course on the amounts you have invested).

      What would I do if I were retiring today? I would leave what I had accumulated in Hostplus Super and the LIC's and ETF's that I hold in ChoicePlus and enjoy the tax free earnings once all were transferred across to the Hostplus/Choiceplus pension product. My Argo and AFIC investments held outside of Super I would NOT sell, as these would attract capital gains tax with the sale - I would enjoy the dividend income they supply me every 6 months along with the fortnightly payments from my Hostplus/Choiceplus pension fund. I would also have 12 months of income sitting in a HIBA in the event of a stock market down turn or a major life emergency.

      Essentially, while ever Super is still offering tax free and CGT free investments in their pension products, I would enjoy that advantage. Knowing that rules can change with Super pensions at a moment's notice I would also retain my investments outside of super too to ensure my income sources are diversified (not putting all your eggs in one basket). Ideally, having your external investments earning exactly the amount you are allowed before attracting tax is a canny set up and then the rest in a low fee Super Pension.

      I could rabbit on for hours and thus I am heaps happy for you to email me if you want to take this chat further off line Sally.

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    2. Mr HM, thank you for your sound advice and your very generous and kind offer to accept an email from me. I will indeed take you up on the offer just as soon as time permits. :-)

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  6. Hmm it looks like your website ate my first comment (it was extremely long) so I guess I'll just sum it up what I wrote and say, I'm thoroughly enjoying your blog. I as well am an aspiring blog writer but I'm still new to everything. Do you have any suggestions for first-time blog writers? I'd certainly appreciate it. buying property with smsf

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