Allocated pension with low MER - Wholesale CFS? Vanguard?

I am trying to help out my in-laws who are looking to establish an allocated pension before my MIL turns 65 in a couple of weeks. They have approximately $300k.

They have spoken to someone at CBA who suggested putting them in one of Colonial First State's wholesale conservative funds. The obvious problem is that CBA/CFS will take 4% up front as well as their adviser fee of 0.44%, on top of the MER.

My in-laws are not wedded to the idea of the CFS fund and are willing to use someone like InvestSmart etc to avoid the 4% contribution fee. I haven't even mentioned to them yet that they might be able to have the trailing commission refunded as well.

I would, however, like to give them a few options with sub-1% MERs.

Does InvestSmart allow you to invest in any of the wholesale funds run by the various managers? If not, do any of the other discount brokers do this?

Alternatively, is Vanguard one of the better options available given their low MERs?

Any help would be most appreciated.

cheers
MaxP

UBS Aust Share - MER of 0.80% Min 20k investment...

Id imagine their would be better funds than this for a pension. Last i heard ING was settling up the best platform that gave allocated pensions a debit card to access money from...

Thanks for the reply, Dave.

I think they're looking at one of the more conservative diversified funds, though.

Is the ING platform you're talking about the PortfolioOne?

no i dont think it was, it was just for pensioners... i dont remember the name as i only read it in the newspaper a few months ago (around april)

Hi guys,

Can't remember the name of the ING product, the keycard is a linked account. Ie, you can't actually use the money in the managed funds but in the bank account in the pension account.

Max, that's a pretty hefty upfront. What are they going to do for the 4%? Apart from get your MIL to sign a piece of paper?

Also she doesn't have to move her money into a pension account, turning 65 just means you can't contribute any more money unless you are working 40 hours over 30 days in a year.

Cheers,

Dan

PS This is general advice, before making an investment decision speak to your FPA registered Financial Planner.

Sounds interesting but probably doesn't suit them. One attraction of the allocated pensions for them is that you can't just pop into a branch to withdraw some money.

The usual: nothing In CBA's defence, I don't think my in-laws negotiated at all.

Yes, it's just an option. But she won't be working any more and there are some tax benefits for them to put this money into an allocated pension, so in that sense it's a use-it-or-lose-it opportunity.

Thanks for your thoughts. It all helps!

May I suggest that you can go to colonialfirststate.com.au website and download the PDS application form. After filling up the form and just send it in. There will not be any 4% upfront fee or adviser fee of 0.44%.

Jas

(PS; I did that for my CFS WS Investment)

Sounds good. I suppose they could even apply for one of the wholesale funds this way.

It is a pretty big punt, though. If CFS whack them for 4%, there'll be nothing we can do about it.

get the pds from comsec or any discount broker and ull get the 4% waied

Hi Max,

There is no-use-it-or-lose-it opportunity unless money is going to be contributed to the super fund. The main tax benefit is obviously moving the funds from the super phase (10%-15% tax on earnings/growth) vs the pension phase 0% on earnings/growth. As an example, $300k may (note the MAY) grow 10% over the year and this would be taxed at 10-15% (say 10% if held for over a year) this tax would be $3k in dollar terms, $300k x 10% x 10%.

For people over 60 withdrawals from super and pension are both tax free, so there is no difference on this side.

In the pension phase for someone under 65 the minimum drawdown is 4% and for 65 to 74 (inclusive) is 5%, this is a forced amount which an owner of an allocated pension must take, so minimum would be $12k to $15k.

Good luck,

Dan

PS This is general information which does not take into account anyone's personal information. Speak to your FPA registered Financial Planner before mkaing an investment decision.