Sunday, 28 July 2013

The best deals in Superannuation in Australia Part 1

We've discussed that all other things equal, low cost and index funds are a cost-effective way to save and invest.  This post will show some of the options for making such investments within Superannuation in Australia.  Note that I have no financial interest in these funds (other than planning to put some of my own Superannuation savings into SunSuper and ING Living Super, due primarily to their low costs) and this post is fairly general and will not take into account your specific needs or opportunities.  I'll be focusing on offerings during the 'accumulation phase', so fees and options will vary slightly if you're already looking at transition to retirement or pensions.


SunSuper are a Queensland-based "Industry Fund".  Industry Funds are typically "owned" by members so are often (but not always) cheaper than retail funds.  Many are now available to the public without needing to be part of the particular industry or region that they were originally intended for.

Their administrative charges are pretty reasonable at $1.25 per week (around $65 per year) + 0.05%. Hidden within their investment options in their product disclosure statement are a number of low-management-fee, primarily index-based options (Investment fees are 2013-2014 estimates from their website):

Investment fee incl admin
Balanced - Index 0.16% 0.21%
Australian Shares - Index 0.15% 0.20%
International Shares-enhanced Index (unhedged) 0.25% 0.30%
International Shares-enhanced Index (hedged) 0.25% 0.30%
Australian Property-Index 0.15% 0.20%
Fixed Interest-Index 0.15% 0.20%
Cash 0.10% 0.15%

These are particularly inexpensive options if you want to mix-and-match your own portfolio broken into different asset classes.  The one thing to watch out for is their Fixed Interest - Index option includes overseas bonds (hedged back into Australian Dollars), which is fine if that's what you want but may not be what you were expecting.  The Index and Enhanced Index funds are managed by State Street Global Advisors, who have a long history of offering index funds in Australia (through Exchange Traded Funds).  SunSuper will automatically rebalance your portfolio for you six-monthly or annually.  They do charge a 'buy-sell spread', basically their transaction costs if you switch between options, as well as a $40 withdrawal fee if you transfer assets out of their funds entirely (to another Superannuation fund).

When I checked for me, their insurance options also seemed reasonably-priced.  One way to compare insurance prices is to use Chantwest's Applecheck (I've included a link to SunSuper which will let you access it to compare funds without paying for the comparison).  In terms of comparing fees overall, I've found the tool less useful (as it compares 'standard' options which often charge higher fees than the index options).  However for comparing insurance fees, administration fees and other aspects of funds I've found it helpful.


AustralianSuper are another industry fund.  Their administrative charges are a flat $1.50 per week (around $78 per year).  Their investment options include (fees for the 2012-2013 financial year):

Investment fee
Indexed Diversified 0.11%
Australian Shares 0.26%
Australian Fixed Interest 0.16%
International Fixed Interest 0.13%
Cash 0.08%

Note that their Australian Shares option is not an index fund but is at least low cost and may be useful if you wish to increase the asset allocation towards growth investments (the Index Diversified option is 38% cash and fixed interest and, unlike SunSuper's Balanced Index fund, does not include Property Investment Trust exposure).  AustralianSuper also charge a similar withdrawal fee.

One other option with AustralianSuper, if you want more control over your detailed investments, is their MemberDirect option.  This does come with additional fees but also gives access to further Index Funds through iShares Exchange Traded Funds.  I'll have more on that option in a later post.

HostPlus round out our look at industry funds.  Their administrative charges are again a flat $1.50 per week (around $78 per year).  Their investment options include:

Investment fee With ORFR
Indexed Balanced 0.05% 0.14%
Cash 0.04% 0.13%
Macquarie Investment Management – Australian Fixed Interest* 0.00% 0.09%
BlackRock Asset Management –  International Fixed Interest 0.17% 0.26%
Industry Super Property Trust – Property 0.30% 0.39%
Industry Funds Management – Australian Shares 0.06% 0.15%

Note * the Macquarie Investment Management – Australian Fixed Interest option is actually Macquarie agreeing to "Guarantee the return of the UBS Composite Bond Index (All Maturities)", not a direct investment in Fixed Interest.

One important additional piece of information with HostPlus is they are currently building up an Operating Risk Reserve as part of the Operational Risk Financial Requirement (ORFR). The tangible effect of this will be "it is estimated that the 30 June crediting rates will be reduced by approximately 9 basis points on an annual basis" for the next three years.  I've included an effective extra 0.09% in the "With ORFR" column above but their options are good value regardless.  HostPlus also don't seem to charge a Withdrawal Fee.

Competition is beginning to heat up among Retail Funds as well as Industry Funds.  I expect this to be a rapidly changing part of the Superannuation landscape over the next few years.  At time of writing some other cost effective ways of investing Superannuation in low cost funds are:

ING Direct, owned by a Dutch banking and financial services company, have some interesting offerings which may be useful particularly in combination with other funds. Their 'Safe' and 'Smart' options do not charge administrative or management fees.  Their select options (total fees 0.75%) are probably a little too expensive compared with products available from other funds.  Like AustralianSuper, for an additional fee they have a 'Shares' option which, for our purposes, can be useful for investing in Vanguard, iShares and other Exchange Traded Funds.  I'll look at this option and AustralianSuper's MemberDirect in a later post.

ING's 'Safe' option allows us to invest in Cash and Term Deposits without extra fees.  Just like all the other Super funds above, these are not directly guaranteed by the government (which is available in term deposits within a self-managed superannuation fund) but are very steady (if typically low-return) investments just like cash and term deposits outside Super.

ING's 'Smart' option is a 50% Cash/50% shares Balanced (index) fund with no management or administration fees (a buy-sell spread does apply).  The particular allocation might not suit everyone, and it does have a $5,000 minimum total account balance (waived when regular contributions are made to the account).  But that's still pretty impressive.  Keep in mind if you have other Super funds, though, that you could have some or all of that 50% cash typically earning a higher return in Term Deposits or Bonds so this should be weighed against the lower fees for the 'share' part of the product.  ING don't charge a Withdrawal Fee.

One other thing with ING is that you are required to keep at least $500 or 1% of your overall investment in a lower-return 'Cash Hub'.

ANZ have recently entered the fray with a number of low cost and index fund options.  You can choose a 'Life-Cycle' style option, where they progressively make your asset allocation more conservative as you get older, a fixed pre-mixed option from 'Conservative', 'Moderate' or 'Growth', or mix your own from: Cash, Global Fixed Interest, Global Property, Australian Equities and/or International Equities (apparently hedged to the Australian Dollar).

ANZ charge a flat $50 administration fee and 0.5% management fee (except on Cash) which is reasonably competitive for a retail product.  A very quick look at my situation suggests their insurance fees are higher than many industry funds.  And a neat feature if you bank with ANZ is that you can see your Superannuation balance in your regular ANZ internet banking.  ANZ don't charge a Withdrawal Fee.

Colonial First State FirstChoice Wholesale Personal Super

Colonial are a bit more expensive in their % fees.  However they don't charge a fixed administrative fee or withdrawal fees so, with a minimum balance of $1,500, are particularly useful when you are just starting out and have a low-balance.  While personally I really like the Industry Funds, those $65+ fixed annual fees are effectively 1% if you only have a $6,500 balance.  For me the break-even point was around $30,000-$40,000 in Superannuation; below that the fixed fees meant that an Industry Fund would be more expensive, while above that the Industry Funds above were better value for me. I suggest you do your own calculations for your particular situation.

Noteworthy options include:
Investment fee
FirstChoice Wholesale Multi-Index Conservative 0.64%
FirstChoice Wholesale Multi-Index Diversified 0.68%
FirstChoice Wholesale Multi-Index Balanced 0.73%
Colonial First State Wholesale Index Australian Bond 0.44%
Colonial First State Wholesale Index Property Securities 0.44%
Colonial First State Wholesale Index Australian Share 0.44%
Realindex Wholesale Australian Small Companies 0.89%
Colonial First State Wholesale Index Global Share 0.56%
Colonial First State Wholesale Index Global Share – Hedged 0.56%

Of course, which fund manager and fund is best for you will depend on your particular situation (in particular on the size of your Superannuation balance and the particular assets which suit your investment timeframe and risk appetite).

Hopefully that gives you a good first-look at some of the low cost and index fund options available in Superannuation in Australia.  As always, I'd greatly appreciate any feedback or information on other good low-fee options that I haven't yet come across.


  1. Thank you so much. I'm still confused as hell, but this has definitely given me a clearer picture of what things to consider and question when deciding. Again, thank you!

  2. Hi
    Thanks so much for taking the time to write such informative posts.I was just wondering what your thoughts were nearly 2 years on since ING launched their Living Super product.Is it now becoming a retail super option to consider?Thx

    1. Hi Michelle.
      ING is certainly a retail option to consider. It's a particularly strong no-fee option when you have a low balance, e.g. early in a career. Once your balance grows there may be less expensive options out there for those who don't want to allocate so much to cash.