ING Super to allow 100% allocation into LICs/ETFs

The Barefoot Investor has just covered the issue in his newsletter.

BTW - I am not Luke.

ING Direct Fees Rip Off!

Hi Scott

ING Direct came to the market a few years back with great product called Living Super (you call this type of fund ‘SMSF Lite’ as it allows you to buy shares within super). If memory serves, it was the first super provider to offer a zero-fee balanced option and it really shook up the market. I was attracted by the ability to access low-cost index ETFs and construct a low-fee share portfolio within my super.

Fast forward a few years and everything has changed. There are now fees on the balanced fund option, and the annual trading fee is 0.50 per cent. It works out as a $700+ increase, negating the very reason for buying the ETFs over a standard fund.

I rang ING and was told the reason was that they have been absorbing costs for a number of years - sounds like a loss leader to me to capture market share. Is this legal? Further, the Morningstar report they commissioned to justify their changes is laughable. I am very angry, because moving super is a pain and you are exposed while you are out of the market! I know AustralianSuper have a similar product. Do you recommend it, are you aware of any others?

Also, I want you to share this with all your readers are aware of these very significant changes to the ING Living Super product.

Cheers, Luke


Hi Luke,

When ING launched the zero-fee super option, I called them up and asked them, ‘what’s the catch?’.

After about twenty minutes of bulldust bingo, I basically worked it out: technically the product was ‘free’ … well, as long as you parked a certain amount of your super in a cash account that paid below the market interest rate.

Uh-huh.

That sort of marketing is too tricky for my liking -- and it seems also for ASIC, which made ING Direct compensate 24,500 of their customers $5.38 million for their “potentially misleading” fee-free statements they made about their Living Super product.

That’s why I’ve never recommended ING’s Living Super product. There’s no such thing as a free lunch!

So, what should you do?

First, you need to look at the costs of switching: you’ll have existing insurance cover in place, and you’ll also have tax implications. However, if you do a bit of research you’ll find there are a range of low-cost industry funds that have dirt cheap “SMSF-Lite”, otherwise known as direct share investing options. ​

 

I'll just leave this here.

Now wouldn't it be great if some more people asked Australian Super to improve their Direct Investment offering ...

 

Hi All,

Thanks very much for raising this I am with Aussie Super and have been considering the menber direct option it's a little more expensive than HostPlus one but better range of ETF's well I thought so but one reservation I have is IF I ever change super fund would get a tax hit?
this does not happen if I just change super fund down the line from one fund to another?

 

You will have to check with them about whether you will get a tax hit but I suspect that you will. With individually held shares you don't have a CGT event until you sell and I think that if you want a rollover into another fund it will be in cash and so they will have to sell the asset which is your shares.

I am with Aussie Super and have a couple of issues with the Member Direct option:

1) I want to move from an Accumulation account to a Pension account. At the moment they cannot preserve the share holdings. They will have to sell the shares to move the funds to my pension account. As I bought CSL at $61 I am not real happy about this ! They say that they are 'looking at changing this' but there is no timeline on when this will happen. I believe that HostPlus already have this issue licked. So for the moment I am stuck with having the Accumulation account sit like this until they do fix it.

2) The number of ETFs available is quite small and I cannot get all the ones that I want - they only have the really popular ones.

Anyhow that is my 2 cents worth

 

Yep a big problem for large pooled Super Trusts. The accumulation and pension funds are separate Trusts. So CGT is generally incurred when starting a pension as the member is moved to a different Trust. Not an issue for SMSFs as the assets stay in the same fund so no CGT when starting a pension. It's due to the structural disadvantage of pooled funds.

From memory I think one or two Industry funds started to offer a rebate to the member when starting a pension to compensate for some of the CGT hit. It still seemed far from satisfactory. But I haven't looked at this this for some time as we have a SMSF. So things may have improved since then.

 

@austing , sorry if you have answered this elsewhere; I could not recall it just now.

How did you go about deciding to set up your SMSF? And what stage of your retirement (or before) did you set it up? Did you do it via your accountant? I am considering eSuperfund now and I am curious if you have a view on low cost online providers vs other mechanisms? What other providers are there to set an SMSF (apart from going through a financial planner perhaps)?

If you had a chance to go back, how early in the piece would you set up an SMSF, knowing what you know now. As always, will be very grateful to any thoughts you might have on these matters.

 

There was little choice of Super Funds with direct share options back then (approx 18 years ago) and fees were higher. So a SMSF seemed like a sensible choice. But overall I probably didn't think it through as much as I should have.

Around 40 years (57 now) of age knowing I would likely be able to access Super at 55. We had very little in Super prior to 40.

Yes.

From what I've read and heard eSuperfund are fine. I haven't looked for awhile but brokerage was on the expensive side and cash accounts restricted to certain providers. A long term investor who doesn't trade frequently would likely find the overall service cost effective given their low $799 fee. But be warned if using "admin only" SMSF providers, you need to make an effort to educate yourself on Superannuation. You may live to regret mistakes if uninformed.

Do a google search and ring some. There are a number of lower cost SMSF providers around. Here's a start:
Comparison Table of Setup & Administration Services - SMSF Review

To be honest it's damn hard to know now given the rule changes and constant tinkering By Governments.

If I was young I'd probably focus more on building assets outside of Super giving the option of early retirement. As for Super I'd likely just select an Industry fund "high growth" option. Then hope that by the time you can access Super at 60 (or maybe later by then) the CGT issue when starting a pension has been sorted.

LICs and ETFs aren't that amazing that you have to put everything into them. There's nothing wrong with letting a low cost Industry Super Fund manage your Super. Then you can do your own thing with Shares, LICs and ETFs outside of Super in your own name or Discretionary Trust etc. SMSFs can be a real pain at times and going forward are likely to become progressively more expensive given the complexity of the new rules.

Phew, lots of questions. Do you also need to know what brand of toilet paper we use?

Not advice, personal view only.

 

Thanks @austing

Re brokerage, eSuperfund has partnered with Commsec. Same brokerage rates apply as it would for a regular Commsec account. They also have their own trading platform if you want to choose that (called EBROKING or some such) but I have not looked into the fees for that.

Also, for their cash account, they have partnered with CBA. Not sure about their interest rates (don't think it will be flash) but at least you will be with a reputed bank and I think the government guarantee applies (up to $250K).

Not advice.

 

That's excellent news. I've looked into eSuperfund a number of times over the years. Cheaper now than previously with Comsec.

Cash account not that important anyhow for many. Even as a retiree I look at cash as a buffer, for liquidity and opportunity NOT so much as an investment.

Good deal on offer at the moment but usually repeated periodically:
Special FREE Offer | ESUPERFUND

With my accountant's SMSF fee creeping up I might consider using them myself given that I only need a purely "admin only" service.

 

On this topic, I was looking at hostplus today, seems they are now offering LIC's as an investment choice? Does not say which ones though, anyone seen or used this before?
Thx

 

Commsec has a decent interface. My trust account is with them. Does anyone know a way to get them to decrease the brokerage for high value customers?

I didn't know you could move your SMSF around easily? I think that is the clincher for me. If fees change I can move to a different super administrator.

 

I stumbled across this today as a candidate for consideration http://www.xpresssuper.com.au/

 

With a SMSF you should be able to move to a different administrator. If a different broker is required it's simply a matter of completing a change of broker form. No CGT as assets aren't being sold. But DYOR and check with the SMSF provider prior to signing up.

 

I know with esuperfund SMSF if you want to move your investments to another administrator then you must convert all your investments to cash first. I see this as a huge negative.

 

I agree. Tell them to get stuffed if that's the case.

 

I am with eSuperfund for past 3 years and find the above comment very interesting. I only buy shares in my SMSF although I am allowed to invest in any asset class permitted by law. eSuperfund has partnered with Commsec for both cash management account and broking account. Broking fees are same as advertised on Commsec. I have my own HIN and CHESS sponsored account and get holding statements directly from ASX.

Therefore, I cannot see any reason for me to sell my holdings if I decide to switch to another administrator when eSuperfund doesn't have any control over my investments. But anyways I have emailed them asking specifically about having to sell investments prior to switching to another SMSF administrator. Will let you know once I hear back.

Cheers,
Oracle.

 

That's what I would have thought too. I've transferred my SMSF twice so far without having to liquidate assets.

 

After some digging, seems they are offering ARG/MLT/AFI, not a bad start....

And at those fees seems like an incredibly good way to run your super.

I bought a copy of the barefoot investor today, flicked to the Super section, he talks about Hostplus indexed balanced fund, charges 0.02% Fee and being the best bang for your buck out there.

 

ETF choice looks quite ok.
https://hostplus.com.au/-/media/Files/Hostplus/Documents/0966-Hostplus-ETF-listing-0217-FA.pdf?la=en

And as stated LICs limited to the three biggies:
https://hostplus.com.au/-/media/Files/Hostplus/Documents/0966-Hostplus-LIC-listing-0217-FA.pdf?la=en

 

I spoke to eSuperfund. You DO NOT have to convert your existing assets to cash when transferring from eSuperfund to another SMSF. You can just transfer all your existing shares, ETFs, LICs etc to the new SMSF. The only time eSuperfund would liquidate your assets is if the new Super fund you were transferring to only accepted CASH which may be the case if you were transferring from a SMSF to a Pooled Unit Trust (eg Retail / Industry fund).

So excellent news it would seem. But do confirm this yourself via email to be on the safe side.