Superannuation is changing. Regulatory change has played a key role in this; the introduction of performance reviews has been a factor in a number of underperforming super products closing or merging, which should improve outcomes for investors. In addition, the onset of ‘stapling’, where investors are encouraged to keep just one super account rather than open a new account whenever they change employer, should reduce the number of inactive, open superannuation accounts on the market. Inactive super accounts are expensive for members and the fees end up eating into savings.
But this hasn’t stopped a raft of new superannuation products coming to market in recent years, often aimed at the self-directed investor looking to make their own investment decisions. This was highlighted in this recent article in The Australian, which discussed the burgeoning trend of fund managers broadening their product offering and offering superannuation products, as well as managed funds.
One thing is clear, there is no ‘one size fits all’ solution for superannuation. Each provider offers something different. Before jumping to another provider, be sure to first check that your needs will be met.
What do you need from your superannuation?
For many investors, a simple superannuation product will suffice, such as an industry super fund, which offers a limited range of investments and simple functionality. Other investors, however, will want all the bells and whistles that come with a superannuation platform.
One of the first decisions you will need to make is whether you want to use a financial adviser. Are you planning to go it alone, or use an adviser to help you make decisions? Not all super products will let you use an adviser, while for others only investors with a financial adviser can access the full investment menu.
Next, you need to work out your investment strategy. It’s not enough to simply say you want to retire at 55 as a millionaire, you need to plan how you’re going to get there. You also need to take into account your risk tolerance and return objectives, bearing in mind that superannuation is a long-term investment vehicle. If you’re not comfortable doing this alone, or don’t know where to start, an adviser can help.
Once your strategy is in place, you need to find a super product that meets your needs. Are you planning on holding a broad range of different types of investments? Or can you get what you need from a handful of managed funds? Some providers have a limited investment selection, and an obligation to invest in that provider’s funds. Some platforms restrict access to investments for clients who don’t use an adviser, or there is a different fee structure if you want access to increased investment choice.
Which brings us to fees. Always look out for hidden costs – the rates you see advertised often don’t tell the whole story. What are you willing to pay for your superannuation administration?
What’s your exit strategy?
Another important consideration for you is what is going to happen when you retire. Although this may be some way off, it’s worth thinking about now. Some superannuation providers don’t offer a facility for you to transfer your superannuation investments ‘in specie’ into a pension vehicle, and some of the newer entrants to the market don’t even offer a pension vehicle. An ‘in specie’ transfer is when where your investments are moved directly from super to pension. The alternative is to sell your investments, transfer the cash, then reinvest the cash – which means you will pay costs, have a potential capital gains tax liability and, importantly, have time out of the market while you wait for the transaction to complete.
Allan Gray Superannuation – designed for clients
We launched Allan Gray Superannuation to give our clients access to the Allan Gray Australia managed investment funds (Allan Gray Funds) at the lowest administration price possible in retail superannuation, as well as to offer a range of other managed funds and direct shares. Today we offer access to over 350 managed funds, all listed investments in the ASX All Ordinaries Index, ETFs, LICs and term deposits. Everyone gets access to the same investment menu.
There is no obligation to invest in Allan Gray Funds. Self-directed investors can make their own investment decisions and allocate their savings where they see fit. Alternatively, you can choose to use a financial adviser to make the investment decisions for you. The choice is yours.
We believe platforms are simply a commodity. Wealth is not created through the platform you use, but through the investment decisions you make and the advice you receive. We price our platform as low as we can offer it today and aim to pass on any future savings to all clients. A low-cost platform minimises the impact of overall costs on wealth creation over the long term.
When it comes to fees, we bold the fine print. You’ll never see us advertising flashy headline rates that only apply to large balances. Everyone pays the same low fees for the same dollars invested, and those with the same adviser may be able to access an additional saving through family group pricing. There are zero asset-based administration fees on Allan Gray Funds in our superannuation.
When the time is right, you can transfer from super to pension seamlessly. In Allan Gray Retirement we offer exactly the same investment menu as we offer in Allan Gray Superannuation, enabling you to transfer your holdings ‘in specie’ directly from your superannuation account to your pension account with no fees, costs or capital gains tax associated with the transfer.
Allan Gray Superannuation is a full-service platform with smart functionality, including easy online applications and transacting capabilities.
Today, investors have more choice than ever before on how they invest their superannuation. With 10% of your salary going into super each month (and due to reach 12% by mid-2025), we believe everyone should take an active interest in how their money is invested.