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Help With SMSF

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brianwh

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In July last year my wife and I commenced an allocated pension. Since then we have drawn approximately $60 000 as pension, our FP and the Wrap Account manager have drawn about $12000 and the funds they put us in have lost more than $100 000. So I am going to move into my own SMSF - I think it is a fair bet that I won't do any worse than they have. But I have minimum experience investing and am hoping that people with their own SMSF's and in the pension phase (or anyone else) can offer their views on what I am planning.

Initially I plan to cash out of all funds and place the money in cash. The amount of money involved is about $1m. I know that this turns paper losses into real losses but figure that I need to start preserving capital. I will then start purchasing blue chip Australian equities (with an emphasis on dividends) up to 10-20% of the total, with a view to extending this to 30%. Further down the track I may look towards some property.

Looking forward to any thoughts you may have.
 
Hey Brian
No doubt you are seeking an Accountant's advice about doing all this? I imagine there would be some issues of preserved and non-preserved, CGT and the like? I agree that managing your own Super is an excellent idea, just not sure about the implications once you have started to draw down a pension. At least if an SMSF loses money, it is your fault and not others. In our case, it was the situation of stockbrokers not having an active interest in our portfolio, as opposed to bad advice. And no-one can have a more active interest in your own financial health than you!

We have done really well in the past (we were in the black this last financial year as opposed to industry losses of around 7%!) and we have a fairly aggressive portfolio of mining shares and outright purchase of land - in the first case a waterfront block of land (110% growth in four years) and now a Marina berth of all things (100% growth in 1 year). So looking pretty good for us but havent done the sums for the current financial year as the miners fell somewhat. We are maybe five years from starting a TRAP I think it is called!

If you leave the country for good I think you can take the lot! Hmm, have always fancied living in Bali!
 
From my limited experience with SMSFs as a Paraplanner, if you commute your current super to a new SMSF pension, there should be no capital gains/loss implications, as there are no tax on earnings within a pension.

Furthermore, if you leave the country, the SMSF loses complying status I believe after 2 years if you are no longer considered a resident of Oz. Therefore, if you do leave, you'll have to come back everynow and then to maintain resident status, otherwise you'll lose the tax benefits of the SMSF (if in accumulation phase).

However, I'm not sure what happens when it's in pension phase. I'm guess if you're over 60, the pension's tax-free anyway, which means you can cash it all out if you wanted to and move to the Carribean! :

Please check with your Accountant / Licensed Tax Adviser for all this stuff though.
 
Have already talked this through with my accountant and that side of things is OK. Its thoughts on cashing out the existing funds, progressively getting into equities etc that I would appreciate.

Cheers
 
I am a newbie my self and far away from pension. In fact I have not entered the workforce as of yet. Anyway I would diverse, diverse diverse. I will be very thoughtful of big miners, as the the signs of peak of comodoties boom are appearing on the horizon. If I was you and have limited knowledge of stockmarket, I will stay away from it for at least one year. After that a clear picture might emerge.

As they say cash is king, I don't see any value in property either. This might be the best or worst time to invest in the market and only time will tell.
See I was of no help at all. Best of luck in any case.
 
Brian, perhaps before you decide to lock in the losses by going to cash, you should consider the individual shares and whether you feel they are solid companies you would want to hold for the very long term. Had you had this idea towards the end of last year - before we saw such drops in the market - cashing out would have seemed like a very good idea.

It might still be the best thing to do. But how are you going to feel if shortly a return of confidence occurs (as distinct from the brief rallies we are seeing at present) and you have sold at what turns out to be at or near the bottom. (Personally don't think this will happen for a while but no one knows.)

So I'd say it all depends on the companies in the p/f.
 
I take your point Julia and have wrestled with this dilemma for a while. At the moment our FP has us in funds with approximately one-third equities (which have under-performed the market), one third cash and one-third property. I figure if I'm mainly cash and dipping my toe slowly into the equity market, I can move slowly if the downward trend continues or go in a bit harder as things move up. In this way the losses are not really locked in unless of course there is a very rapid surge and I miss it. I'm prepared to take the risk on property for the time being.

Would love to hear what others are thinking especially those in the pension phase of their Super.

There doesn't seem to be a section on this web site that deals with SMFS investors specifically. Would there be enough interest to get one going? Does anyone know of any other forums dedicated to this area? (Hope this is not an indelicate question!!)
 
Hi Brianwf,

I did the same for my dad, and also rolled my funds into the same SMSf. If you are post 60 and in pension mode, no tax on your value, mine was a different story, however if your super provider is accounting for you rmember accopunt correctly a tax provision should exist, in effect reducing your member balance taking into account if you rolled out today the effect of tax.

I setup a High interest account and a online share account. We have been pretty cautious, still mostly in cash since cashing up in August last year...thankfully. Do you use a FP? If so why are you going into a Self managed Fund and potentially paying him for % of FUA, why not stay in your exisiting fund?

If you are going to get inot more complex investments then definately enagage an administrator. We have been running the fund for several years now, and one thing we learned, is find a very good administration service that charges a flat fee pa and use them. Just don't leave it to your local accountant like we did for many years, it was cheap, but what i learnt is that if you pay peanuts you get a monkeys. We also had to do alot of the compliance side our selves, minutes, financial reports, record keeping, it got quite a headache and I found I was speading more time administering the fund that actually managuing the investments.

I looked around alot and found many firms that are reasonably priced. Stay away from those that charge a % of FUA - on a $1m you pay around $5k to $10k pa. Go for a flat fee, we pay $1700pa through a firm called Your Super Admin. They took over our account, brought it upto date with the compliance side of things, and they have great online 24hr reporting, no hiddon fees or charges and they also help us with the technical side of things as well as part of the fee for free. All we do now is make decisions on what to buy and sell.

Good Luck
 
Thanks for your thoughts Camel. Reason that I am still paying a FP (and a Macquarie Wrap manager) is that I have not made the move to SMSF yet. I have done homewaork on the admin side of SMSFs. The issue I'm struggling with at the moment is the timing. If I sell out of the Funds that I'm in now(and I have to as most of them are linked to my FP), I am crystallising losses. But on the other hand if I use the money to buy back into some asset classes, as I am selling and buying in the same market, I figure it shouldn't matter.

I am wondering what people with more experience than me think of the logic of this approach.

PS: At this stage I would probably only buy some blue chip Australian equities, gradually building this over time and keep the rest in cash and fixed deposits. No property
 
Camel, what do you mean when you say "the technical side of things" and "as well as part of the fee for free". If it's a flat charge, where does part of the fee come in? For what?

Do you have to use their p/f platform? I'd guess so as this would be how they can streamline the reporting and do it so cheaply.
 
Hi Brian

I had an allocated pension with a large fund manager who kindly reduced my account balance by over $100K this last financial year. I have sacked that organisation and set up my own SMSF thru an online company which sets up the fund with all required documentation, TFN, ABN and with a cash management account, a Commsec account and does all this for $599 pa for end year audit, accounting etc.
Check them out at www.esuper.com.au

Good luck....
 
Hi Jeff

My circumstances very similar. But as I indicated in earlier posts, the dilemma is, is now the right time to change. I would have to cash the money out of at least some of my funds which crystallises the losses at the bottom (?) of the cycle. At the moment, I'm holding off but still haven't come to terms with when would a suitable time.
 
Hi Brian

I assume that the losses you anticipate relate to equity investments. Is it possible to rollover part of your investment to the SMSF without incurring losses? If so, once the SMSF is set up, you can still make contributions to your SMSF if you are still working, the amount per annum depends on age and it is necessary to work at least 30 or 40 hours in a contributing year. If this is possible, you could wait until your equity investments are in a healthier position, then cash them out or alternatively, contribute them in specie into the SMSF at a later date. The transfer would still have to be done at 'market value' and you would have to bear any loss 'privately' but could avoid the need to dispose of any you consider worth keeping.

I would recommend your checking out the esuper website and even giving them a call seeking some advice.

Good luck.....
 
Thanks for your response Jeff. We have a total of 8 funds spread across the main asset classes, including some overseas exposure. All except the 2 interest funds are losing money, some bigtime. But if I move now and get rid of today's "dogs", if/when the markets picks up, they might be winners. There is also an extra dimension to this dilemma - access to 5 of the funds is via a FP licensed to the fund (and I am with one of them) so I would have to cash them out if I go my own way.
 
a couple of points to consider when swapping from WRAPS to SMSF.

u have to cash out Managed funds ( in the case of Macquarie and others)

so there is a buy/sell spread of about .2% minimum each way.

if u want to reinvest in similar products, the wrap platforms get access to wholesale management fees, which are less than retail, which u pay in SMSF.
 
Yeah, I knew this awg. As my accountant said to me, its like marriage, expensive to get out of!! Although he has had recent experience there that has left him a bit jaundiced. But then so have I with funds and FP's.
 
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