Question 1

• I will be inheriting approximately $400,000 in the next several weeks and on financial advice was planning to put the majority into a new superannuation fund, which I have just started. So far, the small amount I have paid in has gone backwards and the first payment initially lost 1.5 per cent. Is it commonplace for them to deduct a percentage of each amount you put in, as I am concerned the deduction from a large amount will be several thousand dollars?

There are a couple of things to take note of.

Your adviser needs to clearly explain and document both the product fees and the adviser fees that will be charged.

Hopefully your adviser has informed you of the fees for their service and how it will be charged.

Advisers are moving towards a flat itemised fee structure, rather than a percentage of funds you have invested. Please clarify this with your adviser.

Is the adviser then charging their fee to you direct or deducting it from your investment? Again, please clarify this with your adviser.

Your superannuation product fees are separate. There should be no initial fee for investing into a super product and ongoing fees for most products are under 1 per cent per annum.

Hopefully your adviser can explain all this to you. Don’t be embarrassed to ask these questions – it’s important.

Financial advisers are all bound by a code of ethics, which includes the below sentence:

You must be satisfied that the client understands your advice, and the benefits, costs and risks of the financial products that you recommend, and you must have reasonable grounds to be satisfied.

Finally, they should have also provided you with their Financial Service Guide (FSG) and a Statement of Advice (SOA) which details more information about their fees and what to do if you have a complaint.

Question 2

• I am 75 and fully retired and have two super accounts – an income stream with about $450K and an accumulation account with about $140K. I am thinking of combining the two accounts to simplify my affairs and reduce account fees.  Is there any reason not to combine the two?

Generally, it’s a good idea to combine your accounts.

When closing an accumulation account, you should always check to see if you have any insurance you may lose. Given your age I suspect it is nil in your case.

If you move your entire balance to a pension, then you will save on earnings tax as it is not payable for pensions. Currently your accumulation account would be paying tax at 15 per cent on its earnings.

Just bear in mind that you will be required to draw out at least the minimum payments from a pension account. This is based on your total account balance and your age, as shown below:

Question 3

• Hi. I have a SMSF with $650,000. I own my own home, worth about $700,000. I am on a disability support pension (DSP) and also about to turn 60. What is the best way of accessing my super to have a more comfortable lifestyle without losing my DSP and ultimately being able to get the aged pension?

As a single home owner you can have assets of $301,750 and still receive a full disability pension.

You could move some of your SMSF into a pension to top up your Disability Support Pension. So long as your assets were still below $301,750 (taking into other assets you have, such as bank accounts etc) you would still receive the full pension. Once you move super into a pension, that amount is then counted under the income and assets test.

Money retained in the accumulation phase of super, including in a SMSF, doesn’t get counted under the assets test until you attain age pension age. Which in your case is 67.

Therefore, only moving a small amount of your super into a pension can let you start drawing down on some super while retaining the DSP.

Once you do hit age 67 you may be entitled to a part age pension.

Craig Sankey is a licensed financial adviser and head of Technical Services & Advice Enablement at Industry Fund Services

Disclaimer: The responses provided are general in nature, and while they are prompted by the questions asked, they have been prepared without taking into consideration all your objectives, financial situation or needs.

Before relying on any of the information, please ensure that you consider the appropriateness of the information for your objectives, financial situation or needs. To the extent that it is permitted by law, no responsibility for errors or omissions is accepted by IFS and its representatives.

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