Anything and Everything about Superannuation

The MySuper options are benchmarked at an underlying investment allocation level over an 8 year time horizon (7 in the first year) after taking into an account an allowance for fees. If they are recorded as underperforming on this test it represents a pretty big issue and those members should definitely investigate their fund further.

The biggest issue for me is how easy the ATO is making it to dump underperforming funds without actually pushing people towards getting proper advice aside from a few crappy disclaimers.

I feel for anyone that loses out on any vital insurance or anything in this focus on "performance".

 

Industry fund statements have been releases.

How did your fund perform?

CBus - high growth 25.95%
CBus - growth (My Super) 19.34%

Sun super - growth 25.4%

Outstanding results in both funds.

 

One of my wifes fund returned 17% and she got a letter (on ASIC instructions) which explain the fund underperformed v benchmarks and explains members have a rght to rollover and explains how they can do that. I bet there were thrilled to be instructed to send that !! I agree they dont mention insurance or other factors. The insurance issue is minor so it is being rolled into her other fund (award legacy) once she changes her contributions choice to override the award (which is now allowed).

Aftre 38 years of industry / employer mandated super I think anyone who doesnt know there is a process and to seek advice is a potato.

Its also dangerous to assume all funds need to produce 25% growth. Member age and "lifestyle Mysuper" etc all plays a part. Its also possible some older memebrs are underperforming due to this mysuper lifestyle oiption which sees them with less risk than they may actually want.

 

Hope all have got their insurance arrangements in superannuation sorted out by tonight.

Major changes to income protection cover from 1 October 2021

Matters such as will apply.

"Policies will no longer be ‘guaranteed renewable’. As a result, every five years the insurer will revise the terms and conditions of a policy and re-assess the insured’s income and occupation position."

 

While not associated with my previous post, the FP and I had a wrangle with the ideas of the ATO concerning the Investment Strategy template. Generic is no longer suitable and the ATO is getting tougher on this issue it seems.

Took a degree of fiddling to determine to which Class of Member I belong.

Another hour of our lives wasted on administrative matters associated with superannuation .

 

I can't recall too many years when that has been the case for any fund. Even last year, it's only been the aggressive/high risk options which have hit this mark.

 

Nah. Boring, mundane MIR returned 72% in the SMSF last year. AFI bombed out with 51% and some others was part of dragging the overall the return down to 44% not including income, etc.

 

But that's not a diversified portfolio.

 

Oh not it isn't. Oh yes it is.

Considering the fund also holds VAS covering the top 300 companies in Australia and VGS with the top 1600 in the world, it fits with this.



Those funds have property too especially VAS at around 7% of the index and VGS at 3%. The LICs also have a smattering of RESI. Plus cash. Plus debt in some. Plus unlisted.

No need in my view to go stuffing around outside of them to diversify for diversification's sake.

 

VAS is a diversified blend of some ASX listed securites and markets (incl property trusts) that seeks to track the ASX 300. Its still 100% listed exposure (or whatever % of the fund assets) . Its a lot quicker to execute one sell trade then 15 sell orders and any balancing events are conducted by Vanguard. But diversification would consider liquidity, different markets etc. The inevestment strategy is up to the trustee/ members. If they want to push "all in" on VAS so be it. If the fund trustee/members choose.

The trustee must also consider the other elements of SIS Reg 4.09 to comply with the investment strategy laws. SUPERANNUATION INDUSTRY (SUPERVISION) REGULATIONS 1994 - REG 4.09 Operating standard--investment strategy

eg risk of making, holding and realising investments, diversification, all the fund composition as an entity, liquidity, cashflow needs, life insurance etc.....

Reg 4.09(2)9b) is one the ATO are attacking funds that have 100% exposure to geared property about. They argue that the auditor may have erred if the auditor accepts a strategy that adopts a "all in" approach to investments in one class or investment. That doesnt eman its prohibited however. It may just be hard to defend.

 

@SatayKing

Do you have a corp trustee, or just yourself and the kids in the SMSF?

Exploring what to do in my upcoming situation

 

I am the sole director of a company which is the corporate trustee of a single member fund of which I am a member.

No to the kids. PDS, insurance, decisions based on $$ amounts contributed, amendment to Trust Deed, potential for disputes, disharmony and all kinds of stuff dreams are made of.

 

From The benefits and risks of adding children to an SMSF | Money Management

The risks
While adding family to your fund can be a powerful and attractive strategy, there’s a risk things won’t turn out as hoped or expected. Two real life examples illustrate this point.

One is the case where a husband and wife were individual trustees of their SMSF. When the wife died, the husband appointed their daughter as trustee of the fund and nominated that his super be divided equally between his daughter and son when he passes away.

When he died, the daughter appointed her husband as a fund trustee and, because the death benefit nomination was ‘non-binding’, they decided to pay the entire benefit of approximately $1,000,000 to her.

The son challenged this outcome unsuccessfully, as the daughter and her husband had been validly appointed as trustees and were legally entitled to not follow the father’s non-binding death benefit nomination.

The second example involved an SMSF where the trustees were a husband, wife and son. This was a complicated case and there were many ramifications.

But the key point here was that the son had a drug addiction and withdrew most of the money from the fund. The result was they lost their retirement savings and a tax penalty of 45 per cent had to be paid.

While these outcomes could have been avoided or reduced with more careful planning, they highlight why it’s so important to consider the benefits and potential risks when adding members to an SMSF.

 

Strange things will probably happen at some stage involving an SMSF and deceased estates. BNBN has death benefit payable to estate. Will has superannuation death benefits proceeds trust included but also gifts shares held by Corporate Trustee to Executor (transfer control.) I reckon before the Executor can do anything much in regard to the death benefits they will need to apply for a Director ID.

Won't they be surprised.

 

Had a bit of a wry laugh at this statement. Essentially it's implying "I don't entirely trust you" in which case why would bother to going to all the effort? Just have as few others as possible involved in your financial matters when you are alive or subsequently administering your estate.

Anyway, once you have shuffled off you're out of the equation.

 

Further to the article linked by @Hockey Monkey, here is a more recent one on the pros and cons of adding members to an SMSF.

Adding a member to an SMSF: Pros and cons

Although I am copying only some of the bad side, there are obviously benefits too which are contained in the body of the article.

"Disadvantages of adding members

Some disadvantages to adding a member may include:

• Adding a member who subsequently separates/divorces their partner/spouse may result in the SMSF becoming involved in an expensive and protracted family law dispute.
• Other disputes may arise among members, e.g. the parents may want conservative investments while the children may want to take more risk, e.g. crypto currency. Parents will need to share information on their retirement savings and may not like to be accountable to their children for bad investment decisions.
• In one sad case, the son with a drug addiction had access to the fund’s bank account (as he was an individual trustee) and misappropriated almost all the fund’s assets (including all his parents retirement savings) to feed his drug habit (Triway Superannuation Fund and Commissioner of Taxation [2011] AATA 302). The parents, as loving parents tend to do, then sought to cover up the misappropriation by their son until the auditor found out and notified the ATO. This case shows the risks of adding children as trustees/directors of an SMSF.
• Increased chance of death benefit disputes including challenges to reversionary pensions to a surviving spouse, challenges to binding death benefit nominations (BDBN) and similar disputes. Even with a BDBN in place, disputes may still arise challenging various items such as the effectiveness of the SMSF deed, pension or BDBN documents, any change of trustee or whether an attorney was acting appropriately under an enduring power of attorney (EPoA) or in conflict.

The above advantages and disadvantages are a broad summary and are not an exhaustive list."

 

It also depends who the additional members are

1. Spouse
2. Other relative - close
3. Non-related
4. Child (under or over age 18)
5. Bankrupts or prohibited persons
6. Future marital dispute members
7. Non-resident members
8. Members with potential for future lack of capacity issues affecting their involvment exposing their super assets to risk

There can be minor benefits for integenerational funds. OR major complexities with asset segregation, inability to segregate or even statutory bars on members being entitled to some fund assets acquired from other membesr (eg NSW commercial property). While trust law and super laws were drafted with unanimous decision making in mind this isnt always the case and even the Corporations Act may not require all persons to be involved. How will decisions be made ?

SMSFs lack prudential safeguards due to the premise that ALL members will also be a trustee Director AND be equally involved in decision making. If that doesnt occur the member may have little recourse and may even need the Supreme Court action

IMO I would recommend legal advice before considering adding non-spouse members.

 

So much for acting in the members interests if this is in fact the situation (behind a paywall.)

Cbus members face fee hike to protect badly behaving trustees

 

Industry funds have also hidden behind collective fees to the industry funds entity which is union controlled and dominated... a held secret from even the Govt. In a nutshell members are paying to advertise to bring in new members. The existing members get zero benefit from this. Then these unions had clauses inserted into awarsd to FORCE contributions to those funds. This is why recent changes seek to ensure they remain cost and performance competitive. Extensive union led media is very expensive and the fiction of comparing the pair when fees have been outlawed for years is even now a stretch. Using old data to misrepresent these difference in future balances is their game.. eg And even if you’d only switched 10 ($14,418) or 5 years ago ($3,441), you’d still be better off...So they use data that is manipulated back when fees allowed advisers to be paid to reflect that former issue into future compounded growth. Dodgy maths in my view. Its like suggesting air travel stops covid because nobody who flew on a plane in 2019 caught covid.

 

The saga continues. Maybe it should be streamed on Stan.

"A last-minute request by ASIC has delayed a class action’s attempt to freeze a $7.2 million Dixon penalty headed for the Commonwealth."

ASIC blocks class action attempt to freeze $7.2m Dixon penalty