Make your money count

Could an ethical self managed superannuation fund work for you?

Did you know that your superannuation does not need to be invested with big multinational fund management companies or in industry super funds with standard choice offers?  Investing in a Self Managed Superannuation Fund (SMSF) with specialist advice by an ethical investment adviser can create a financially rewarding and socially/environmentally positive retirement base.

Firstly, a Self Managed Superannuation Fund (SMSF) requires a reasonable account balance to justify the establishment costs and trustee obligations. Generally a minimum of $200,000 with regular contributions would be needed.

You should consider a self managed super if:

  • You are not happy with the ethics and/or performance of your current superannuation fund.

  • You want to be selective about the investments you will have in your super fund.

  • You want a more ‘hands on’ approach.

  • You want control over the assets that are bought and sold.

  • You want to buy an asset like a residential property that cannot be bought through a standard super fund.

By having a SMSF you can buy shares that support businesses which reflect your ethical concerns and values. The standard superannuation investor will have the share component of their superannuation fund invested predominately in the largest 50 Australian share companies in a similar ratio to the size of those companies. Therefore companies such as BHP, Santos, Woodside Petroleum and Rio Tinto with significant Coal, Petroleum and Uranium interests would all be predominant shareholdings in a standard superannuation fund.

Within your SMSF you can invest in those international and Australian companies that display very positive corporate citizenship. These companies look after the community, their staff and the environment have strong brand loyalty and staff retention. Historically companies with good ethics tend to have strong consumer loyalty and staff retention. Ethical companies that look beyond the financial bottom line are generally forward thinking businesses that are reducing their financial risks by assessing the environmental and social costs of their businesses.

For the individual investor, it can be difficult to find out about these businesses in the sea of “greenwash”.  At Ethical Investment Advisers, we recommend investments which truly meet your ethical values and your financial needs.

Other investment choices for the ethical investor

There are bonds that provide capital risk management and security at a reasonable income return. These can be issued by companies with positive ethics including some banks as well as governments. Hybrid fixed interest/shares opportunities can provide attractive after tax income with growth prospects within companies that suit an investors risk and ethics profile.

The advantage of a SMSF is that you can invest your retirement savings your way and an ethical investment specialist can ensure that your risk and values are reflected within the choices recommended and you know where you money is invested and what it is doing.

A standard superannuation fund product is quite intangible and the underlying investments an unknown to most investors. Ethical investment within a SMSF is quite empowering for clients as well as financial rewarding.

Trustee responsibility

Having a SMSF has its downside, as Trustees you would be responsible for the investments and ensuring that the super is run according to the various rules and regulations set out by the Australian Tax Office (ATO). However you can enlist the services of your adviser or accountant to assist with the set up of the fund and the day to day running of the super.

Costs

There can be up-front costs of setting up the SMSF, including the establishment of the Trust Deed and registering for an ABN with the ATO, although in many cases there is little or no upfront fee for setting up a SMSF.

The cost of running a self managed superannuation is generally around the same cost as a public offer fund, but slightly more than an industry fund. Of course this depends on how much money you have in superannuation. As your superannuation grows, the more affordable a SMSF becomes and with large balances, a SMSF can actually be cheaper than an industry super fund.

Profits

Responsible Investment Funds have consistently outperformed average mainstream funds. The average responsible investment fund returned 11.34% per annum, compared to 8.18% per annum generated by the Large-Cap Australian Shares Fund Average, and 9.05% per annum performed by the S&P/ASX 300 Accumulation Index (over the last 10 years).  See the Responsible Investment Association Australasia’s Benchmark Report for more details: http://www.responsibleinvestment.org/riaa-research/

Find out more

At Ethical Investment Advisers we can provide you with the information and assistance you need to set up and run a self managed super fund which suits your personal financial needs and ethical values. We specialise in providing environmental and socially responsible investment advice for self managed superannuation funds.  Make your money count.  Start investing ethically.

Author: Karen McLeod, Ethical Investment Advisers AFSL 276544.

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