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starting multiple separate pension accounts

Discussion in 'Superannuation, SMSF & Personal Insurance' started by poltroon, 15th May, 2012.

  1. poltroon

    poltroon New Member

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    Should I put all my hard-earned super into a single pension fund, or are there benefits from splitting it between 2 or 3 separate managers?

    Over the years I've built up a healthy balance in my super fund (accumulation phase). When I retire the lazy option is just to roll from the accumulation account into a corresponding pension account. Even if I'm happy with my current fund is that a smart thing to do?

    Splitting it up will almost certainly increase the cost.

    But is there a "risk" discussion to be had? With luck a pension might have to run 30 years or so and a lot can happen in 30 years. In theory the value of the fund is in the underlying assets and the manager is just a "middle-man". But a fund manager in trouble might make accessing the assets messy. What is regarded as good practice in this area ?
     
  2. Andrew Newman

    Andrew Newman Well-Known Member

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    Hi poltroon

    An account based pension (typical name used) is an account in which you can invest your super savings in exchange for a regular and flexible income, with significant tax benefits. The investments held within your account based pension can be the same as those held within your super account.


    The smart thing to do will depend on many factors, including your age, your financial situation, your income requirements and so on.

    I am happy to discuss your situation in greater detail.

    Kind Regards
     
  3. funkandjunk

    funkandjunk Member

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    if I was worried about diversification personally I would invest in mult asset multi fund managers. I know you're trying to mitigate risk but I don't honestly believe that if needed we haven't had a collapse in the superannuation industry.

    hello if you are concerned then perhaps investing your funds across multi fund managers might give you a peace of mind.
     
  4. Andrew Newman

    Andrew Newman Well-Known Member

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    Do you know of any that have performed well and what their fees are?
     
  5. funkandjunk

    funkandjunk Member

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    Andrew, ackowledge your point. Yet the question wasn't about performance. You woukd be well boind to understand the person's concerns - that primarily relates to diversification. Since you ask, what asset class has (besides cash and fixed interest). I don't think investment philosophy has particularly mattered single asset, multi asset, passive, active - its all much the same - negative returns over the last 5 year's - not blaming fund managers just stating a fact -
     
  6. Andrew Newman

    Andrew Newman Well-Known Member

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    For the 5 year period ending 31/12/11:

    • The All Ordinaries Index has returned about negative 6.8%.
    • My direct share investing method which is similar to that used by Warren Buffet has returned about 42.7% (Click Warren Buffet Investment Method for more information).
     
  7. Dolfinwise

    Dolfinwise Well-Known Member

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    Multiple Pensions

    Its possible to solve the diversification issue within one pension in a number of ways (via wraps/Master Trusts of a SMSF Pensions for example). A more compelling argument around multiple pensions is often abut tax. Rules will change over time but currently Estate planning considerations mean it is often wise to quarantine different Superannuation components into different pensions to allow Pensions with less concessional component be uncontaminated by mixing them with those primary comprised from deductible contributions and earnings. When managed well over tiem this can significantly reduce tax upon death of the Pensioner and payment to non-dependent children. Its a very complex area and professional advice should definately be considered. Even if current Super is all in one account a recontributions strategy may often be appropriate to facilitate this.

    Regards
    Jason
     
    Last edited by a moderator: 19th Jun, 2012
  8. funkandjunk

    funkandjunk Member

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    Andrew I am not aninvestment expert so I can't comment. I fail to see how investing in direct equities offers diversification much as the original poster was desiring. So much for listening and spruiking your own services...

    In relation to estate planning concerns, point acknowledged. Recontribution strategies can assist however if the individual can't do recontribution, maybe due to age or caps, just find a fund that pays anti detriment. Much of the death benefits tax paid by kids is watered down by anti detriment.
     
  9. poltroon

    poltroon New Member

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    Thanks for comments, the note on Estate Planning is interesting, I'll look into it.

    Just to come back to my original question. Lets be really simplistic, and ignoring for the moment the point about separating the money with different tax status.

    Suppose I retire from work age 60 with $1m in a super fund. Can you see any advantage/disadvantage for the following 2 scenarios?

    (1) Roll the whole $1m into one or more pension accounts managed by (say) Aus Super

    (2) Split the money into 2x $500k lumps and put half each into one or more pension accts managed by two unrelated entities such as Aus Super and CFS

    Please note ... I'm not looking for recommendations on Aus Super or CFS or any other possible organisation, that's a whole different question, I just picked those 2 names as big familiar names for illustrative purposes.

    I know there are lots of other things to think about, but here I'm just looking at the one single issue.
     
  10. Andrew Newman

    Andrew Newman Well-Known Member

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    Hi poltroon

    Is there any reason you are only looking at the issue of: one or more pension accounts with 1 provider versus one or more pension accounts with 2 providers?

    Kind Regards
     
  11. poltroon

    poltroon New Member

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    Andrew,
    I have 100 questions to answer. I find it easier to break it down into pieces and answer each in turn. For me, the question about "how many pension providers?" is quite separate from the question about "which pension provider(s) to choose?" or "should I self manage instead?", or "....".
    Maybe that's just the way my mind works ...
     
  12. Andrew Newman

    Andrew Newman Well-Known Member

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    Hi poltroon

    I like to keep things simple, so one or more pension accounts with 1 provider is simpler than one or more pension accounts with 2 providers.

    Another question to ask yourself, pension provider or SMSF pension?

    Kind Regards
     
  13. funkandjunk

    funkandjunk Member

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    The only difference I can see is who is investing your money in the background. For example, let's say you have fund manager X with Australian Super and fund manager Y with CFS, the returns generated are governed by X and Y's investment performance. However, the more fund managers that are working in the background, the more diversification you have, yet not sure whether that is costlier from a MER perspective. Your research might confirm that.

    You raise an interesting point and at least in my relatively young experience in the industry, I don't know about the involved issues when one super fund goes belly up. From my understanding,this just hasn't happened in the recent past. Will there by complications around getting your money from underlying fund managers, if the super trustees they are investing on behalf of, goes bankrupt? Not sure. (Maybe the experts out there can correct me on this - not sure whether this is related in any way to APRA prudential requirements concerning superannuation funds)

    From a practical perspective, a lot of retirees seem to be comfortable with investing with a super trustee. There is enough diversification as long as there are multi fund managers in the background investing on behalf of the super trustee.

    Personally, I don't see a need to have my money invested with multiple super trustees as long as I have access to multi fund managers ( but I think the litmus test is your own peace of mind).

    Another issue - probably not a big issue. How are you with paperwork? Are you comfortable with having two sets of paperwork for things such as statements, Centrelink paperwork (if appropriate, perhaps down the track)?

    Making a big assumption here? What does your spouse prefer? Would she prefer one account in case of a death benefit that is taken as an income stream or would she also be happy with two income streams?

    Hope this assists.