(AU) Superannuation selection for someone young

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Topic Author
tuli
Posts: 3
Joined: Tue Jun 14, 2022 8:34 am

(AU) Superannuation selection for someone young

Post by tuli »

Hi everyone, I'm new to the forums and investing in general.

I also just started making a reasonable income (70k+super) after graduating university. After working around 9 months I now have half my salary as savings, and figure I should start caring about my finance. For context, I am only somewhat familiar with financial jargon, if it helps, I am making my way through "If you can" and am up to reading "Common Sense on Mutual Funds" (A little over 100 pages deep). I was hit with a realization reading over the costs section in regards to my super. I probably have some costs I can reduce, which could greatly impact my earnings over time (especially considering I wont be retiring for 40+ years, I'm under 25).

In regards to fund types, I am inclined to invest in either an Index Diversified portfolio, or just going 100:0 into International Shares (which I'm sure someone smarter than me will tell me good reasons not to) based on a comment from Bogle:
"It would not be imprudent for a highly risk tolerant young investor (25 years old or so), who is just beginning to invest for retirement, to allocate everything to stocks, provided that the investor has confidence that regular investments could be made through thick and thin."
I feel like the quote accurately describes where I am at in my life. Anyway, I made a (very messy) spreadsheet with funds I were interested due to low costs, and the lowest cost funds looked like so (there may be mistakes, so don't take it as gospel).

Based on 50k invested.
For Index Diversified:
  • Rest: $133.00
  • HostPlus: $143.49
  • AvSuper: $156.00
  • AustralianSuper: $172.00
  • Hesta: $182.00
  • BrighterSuper: $185.00
For International Shares:
  • Rest: $133.00
  • HostPlus (Hedged): $153.49
  • BTSuper*: $155.00
  • AwareSuper: $157.00
  • Commonwealth Bank Essential Super*: $160.00
  • HostPlus: $168.49
  • Mine Super: $187.00
*For profit funds (Not an industry superfund).

So, currently I haven't moved anything yet, I have <10k in my super, just sitting in Balanced AustralianSuper (my employers choice) and am considering my options. To me, I like the idea of either Rest or HostPlus, since both their International Share and Index Diversified funds are quite low cost. Is there anything else I should be considering here that I haven't?

To note, I have little living expenses, and have a large amount of super I can pay forward, so I would expect to have 50k+ in the account within the next 2 years quite easily, if not within 1 year depending on my salary increase.

Also I hope the information above proves useful to other people :happy .
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andrew99999
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Re: (AU) Superannuation selection for someone young

Post by andrew99999 »

You mentioned 100% international shares, so the index diversified options do not suit you as it is 30% defensive asses.

The question is, do you want indexing? AusSuper does not have that (other than an index diversified option with 30% defensive assets), and some others may not.

For low-cost indexing that offers you to select your own proportions of indexed investments (Australian index, international index, fixed interest index for later), I would look at:

• HostPlus
• Australian Retirement Trust
• Aware
• Rest
• CFS (is not too much more expensive for index options)

Personally, I'd stay away from the banks and BT.
Topic Author
tuli
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Joined: Tue Jun 14, 2022 8:34 am

Re: (AU) Superannuation selection for someone young

Post by tuli »

You mentioned 100% international shares, so the index diversified options do not suit you as it is 30% defensive asses.
That is true, and I am likely to chose the shares but thought I may as well note down both options since they tend to have similar costs, and thought perhaps there may be something I am not thinking of which may make me inclined to select them instead.
The question is, do you want indexing?
As it stands right now, I see no reason to stray away from indexing so that is likely what I will opt for.
Personally, I'd stay away from the banks and BT.
Just curious, is there a particular reason for this? If they have similar offerings with similar costs I don't see any reasons why they would be an issue, although I am young and naïve :D
For low-cost indexing that offers you to select your own proportions of indexed investments (Australian index, international index, fixed interest index for later), I would look at:
• HostPlus
• Australian Retirement Trust
• Aware
• Rest
• CFS (is not too much more expensive for index options)
Thanks for the feedback. I'll have a further dig on these funds specifically and see how I go.
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asset_chaos
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Location: Melbourne

Re: (AU) Superannuation selection for someone young

Post by asset_chaos »

tuli wrote: Mon Feb 27, 2023 8:04 pm
Personally, I'd stay away from the banks and BT.
Just curious, is there a particular reason for this? If they have similar offerings with similar costs I don't see any reasons why they would be an issue, although I am young and naïve :D
A general reason is that the for-profit funds from banks and insurance companies were the ones caught making the most egregious breaches of trust in the superannuation royal commission a few years ago. More specifically, the fees appear to be higher (about double) than what you've quoted. I had to search for it, but I find the BTSuper costs page says,

Code: Select all

APIR Code 	Investment Option name 	Administration fees and costs (%)1 	Investment fees and costs (%)2 	Transaction costs (%)2
BTA3104AU 	Index International Shares 	0.28 	                                 0.20 	                                 0.00

1. Administration fees and costs are made up of 2 components. The percentage-based administration fee (disclosed in the table) is calculated daily on the net asset value of each investment option and reflected in the investment options’ daily unit prices. The $4.66 per month dollar-based fee is deducted directly from your account balance on or around the 20th of each month by way of deduction of units, by withdrawing units from your investment option(s).

2. The investment fees and costs and transaction costs of the option are estimated amounts in relation to the 12 months to 30 June 2022 and may vary over time. Please refer to the Product Disclosure Statement and ‘Additional explanation of fees and costs’ in the BT Super – Investment Guide for more information.
You have to add the three fees and costs together, and the footnote says they've rolled the fixed fee into the variable looking admin fee: the index international shares fund costs 0.48% or $240/year on a $50k balance. Note that that cost is still ok when compared to the costs of many default super funds, which are actively managed. You can use the search box at the top right of this page to look up other threads on Australian super. The median cost of a default super fund that's open to the general public is 1%. Not to disparage a for profit index option too much, BT's appears to be not bad compared to what you could get stuck with, but you can do much better. andrew99999 lists good places to investigate.

A general principle I've devoloped for Australian super fund complexes is if I have to resort to the search box to find where fees and costs are listed, then it's probably not an organization I want to deal with. I had to resort to the search box with BT.

In general super costs have three components. 1) a fixed admin fee, so many dollars a week or a year. 2) a variable admin fee, a certain percentage of your assets deducted every month or quarter. And (3) a variable investment management fee, a certain percentage of your assets deducted every month or quarter. Some places may set one of the admin fees to zero.

Good luck in the new job and best wishes on your investment journey.
Regards, | | Guy
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andrew99999
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Re: (AU) Superannuation selection for someone young

Post by andrew99999 »

tuli wrote: Mon Feb 27, 2023 8:04 pm
Personally, I'd stay away from the banks and BT.
Just curious, is there a particular reason for this? If they have similar offerings with similar costs I don't see any reasons why they would be an issue, although I am young and naïve :D
The royal commission uncovered the most shocking stuff from the big financial institutions. In contrast, industry superfunds are not-for-profit and run for their members.
Topic Author
tuli
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Joined: Tue Jun 14, 2022 8:34 am

Re: (AU) Superannuation selection for someone young

Post by tuli »

Thanks Andrew and Guy, appreciate the info.
You have to add the three fees and costs together, and the footnote says they've rolled the fixed fee into the variable looking admin fee: the index international shares fund costs 0.48% or $240/year on a $50k balance.
I'm not surprised I made a mistake as while I was getting towards the end of the list of superfunds I used, I was getting a little fed up with trying to find all the fees and costs. It's so surprising how difficult it can be for some funds can be. Some of the websites are very unintuitive and made me dislike some of the funds immediately, which in my mind doesn't make sense. Wouldn't a business want an accessible website for its customers to draw in and keep them?

I did also have a look over the forums regarding super, and it definitely helped me decide I wanted to reduce my fees, but in regards my goals and age, I thought it would be reasonable to make a new thread. And I'm quite glad I did, I feel more confident in making a long term decision now :happy
itchyback
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Joined: Tue Mar 07, 2023 12:15 am
Location: Perth

Re: (AU) Superannuation selection for someone young

Post by itchyback »

Hi Tuli (and all!),

This is my first post here, and I'm quite literally in the same research stage as you (although I expect you've moved forwards since the latest post). However, I'm just entering my 30s, to give some perspective.

As a result of our similar journeys, I've also been doing a bit of research into super lately as well. So I hate to be 'that guy,' 8-) but I'm surprised to not see Vanguard's super as an option here? They seem to have the ease of asset allocation that you want, along with the low fees (0.56% on non-managed, 0.58% 'Lifecycle'). In my research, and I could be wrong (please correct me if so!), but apart from Uni Super (0.48%), I don't know of a lower-fee fund in Australia barring perhaps an employer's arrangements with a fund.

It's also worth noting, and I don't remember which fund specifically it was, but some funds may charge a fee for switching up your allocations. Definitely check the PDS's for the total fees. Some of them don't make it easy to find the PDS, let alone the entire fees!

Given we're in a similar stage of our investment journey, I'd be quite happy to chat. Feel free to send a PM if you like.

Cheers,

Sam
Hockey Monkey
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Re: (AU) Superannuation selection for someone young

Post by Hockey Monkey »

itchyback wrote: Tue Mar 07, 2023 12:40 am As a result of our similar journeys, I've also been doing a bit of research into super lately as well. So I hate to be 'that guy,' 8-) but I'm surprised to not see Vanguard's super as an option here? They seem to have the ease of asset allocation that you want, along with the low fees (0.56% on non-managed, 0.58% 'Lifecycle'). In my research, and I could be wrong (please correct me if so!), but apart from Uni Super (0.48%), I don't know of a lower-fee fund in Australia barring perhaps an employer's arrangements with a fund.
There are many lower cost indexed super options than Vanguard Super, some sub 0.10%.

Check out andrew99999's list above

Vanguard can shine for smaller balances though as they don't charge a fixed administration fee.
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andrew99999
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Re: (AU) Superannuation selection for someone young

Post by andrew99999 »

itchyback wrote: Tue Mar 07, 2023 12:40 am I'm surprised to not see Vanguard's super as an option here? They seem to have the ease of asset allocation that you want, along with the low fees (0.56% on non-managed, 0.58% 'Lifecycle'). In my research, and I could be wrong (please correct me if so!), but apart from Uni Super (0.48%), I don't know of a lower-fee fund in Australia barring perhaps an employer's arrangements with a fund.
You can 'make your own' using 2-4 index investment options from other superfunds and get it much, much cheaper. HostPlus you can get it for under 0.10%. Rest about 0.15%, ART about 0.20%, can't remember Aware but somewhere in that range. Even CFS (a private company) has indexing options for about 0.35% including the admin fee.

I don't know how anyone can call 0.56% low fee.
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asset_chaos
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Location: Melbourne

Re: (AU) Superannuation selection for someone young

Post by asset_chaos »

itchyback wrote: Tue Mar 07, 2023 12:40 am As a result of our similar journeys, I've also been doing a bit of research into super lately as well. So I hate to be 'that guy,' 8-) but I'm surprised to not see Vanguard's super as an option here? They seem to have the ease of asset allocation that you want, along with the low fees (0.56% on non-managed, 0.58% 'Lifecycle'). In my research, and I could be wrong (please correct me if so!), but apart from Uni Super (0.48%), I don't know of a lower-fee fund in Australia barring perhaps an employer's arrangements with a fund.
Itchyback, welcome to the forum.

This thread looks at Vanguard super. The key is to distinguish a super fund complex's default fund and other optional funds in the complex that you could choose instead of the default. The default fund is what you get if you sign up and don't make any other choice. At every super complex, I believe except Vanguard, the default fund is actively managed. That thread has a little graph, but the median cost among default funds open to the general public is 1%. The lowest cost default funds are down around 0.58%. We speculate that Vanguard deliberately priced their super to be on par with or just a touch lower than the lowest cost existing default funds. Vanguard super's default funds in and of themselves are great; however, you can find essentially the same set of index funds as options at lower cost at other super complexes. In Australian super always look at the optional funds; never take the default.

Not long ago there were few (2 or 3) super complexes that offered low-cost, indexed stock and bond funds as options. Happily now there are many more super complexes with indexed options, but Vanguard's is the only complex where the default funds are index funds. Nonetheless, the informed super investor, who's come to this board, can right now invest in good, low-cost index funds as options at other super complexes, at an all-up cost of half or less than what Vanguard super currently charges. Andrew999999 lists good places to investigate. Maybe that'll change and a few years from now Vanguard super will be competitive with existing indexed super options, but for now it's not.
Regards, | | Guy
itchyback
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Location: Perth

Re: (AU) Superannuation selection for someone young

Post by itchyback »

Hi All,

Please accept my sincere thanks for the clarifications and offering my amateur oversights a line of research. This has been most hopeful! Sorry too for the slight derailing of this thread. :oops:
asset_chaos wrote: Wed Mar 08, 2023 5:01 pm Itchyback, welcome to the forum.

This thread looks at Vanguard super. The key is to distinguish a super fund complex's default fund and other optional funds in the complex that you could choose instead of the default. The default fund is what you get if you sign up and don't make any other choice. At every super complex, I believe except Vanguard, the default fund is actively managed. That thread has a little graph, but the median cost among default funds open to the general public is 1%. The lowest cost default funds are down around 0.58%. We speculate that Vanguard deliberately priced their super to be on par with or just a touch lower than the lowest cost existing default funds. Vanguard super's default funds in and of themselves are great; however, you can find essentially the same set of index funds as options at lower cost at other super complexes. In Australian super always look at the optional funds; never take the default.

Not long ago there were few (2 or 3) super complexes that offered low-cost, indexed stock and bond funds as options. Happily now there are many more super complexes with indexed options, but Vanguard's is the only complex where the default funds are index funds. Nonetheless, the informed super investor, who's come to this board, can right now invest in good, low-cost index funds as options at other super complexes, at an all-up cost of half or less than what Vanguard super currently charges. Andrew999999 lists good places to investigate. Maybe that'll change and a few years from now Vanguard super will be competitive with existing indexed super options, but for now it's not.
Hi asset_chaos,

Thanks for your kind welcome, I appreciate it. Your insights have been a great help. After spending a short time looking at Andrew's list (thank you Andrew!) and comparing the fees with a more sound understanding, it's become obvious that you can save yourself a substantial amount of money with 'self-managing.' I shall definitely get my head down on this, but as Tuli said, I'm much more confident going forwards -- thank you!

Hopefully my next contribution to this forum will be from a better-educated perspective. :) Although I do expect to stumble.

Thanks so much,


Sam
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