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While opinions vary on the minimum amount you need to hold in existing funds to roll over into your DIY fund. However, we feel the deciding factor should be, that you should know, what to do (how to invest) with the funds when they are rolled over into your DIY Super Fund.
Some trustees, by trading in shares can achieve high returns on investment and can justify high percentage of administration fees when balance in their fund has been low in initial years.
The best method of determining the minimum amount required to establish a DIY Super Fund is by dividing the indicative costs of a DIY fund by current fund balances to obtain an estimated administrative percentage. And compare this percentage with the percentage being charged by their Current Super Funds to make a direct comparison.
Shown below are the indicative costs of establishing a fund (i.e. Year 1) and ongoing Administrative costs (second and subsequent years) while your DIY Super Fund is established and Administered by us.
| Costs |
Year
1
|
Year
2 and Subsequent Years
|
|
$
|
$
|
|
| Trust Deed & Set Up |
495
|
Nil
|
| Annual Administration |
495
|
880
|
| Annual Return Fee |
45
|
45
|
| Total Cost |
1035
|
925
|
The table below calculates the administrative percentage by dividing the administration costs by the fund's opening fund balance.
| Family Fund Balance | 50,000 | 75,000 | 100,000 | 125,000 | 150,000 |
| Year 1 | 2.07% | 1.38% | 1.04% | 0.83% | 0.69% |
| Year 2 onwards | 1.85% | 1.23% | 0.93% | 0.74% | 0.62% |
Many trustees of DIY Super funds believe that, as long as their investment returns are out performing their Current Super Fund managers' returns, the higher administrative percentages in the earlier years can be recovered in subsequent years.
In some instances trustees think that it is purely a matter of choice that they want to be in direct control of their retirement benefits and are therefore willing to pay a premium.
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You may or may not be paying Entry or Exit fee but most funds charge Administration and Management Fee.
Administration Fee
This fee is usually displayed on your six monthly statement and is charged
for keeping account of your money like paying contribution tax, arranging
insurance for you etc.
Management Fees
This fee is usually NOT DISPLAYED on your six monthly statements and is
charged for managing your money. This fee could be anywhere between 1.5%
to 6% of your fund balance. Hence if your family's fund balance is $50,000
you could be paying anywhere between $750 to $3,000 every year to the fund
manager for looking after your money.
Your whole family's fund balance could be as high as $100,000 and this fee could be as high as $1,500 to $6,000. Due to this fee being embarrassingly high in comparison to poor returns, the fund manager are obviously not very keen to display this figure on your six monthly statements. Funny part is that the SIS Act actually allows them to hide these actual fees from fund members.
The fund manager hides this fee by making a statement in the six monthly reports "Income is credited to the account after charging management fees", hence of the face of it, the actual fees are hidden. Also nowhere in the six monthly reports the fund manger discloses the rate of his management fees. This fee is usually in fine print in the disclosure statement when you join the fund.
Sometimes, your employer does not even supply you with a "Disclosure Statement" when you join the fund (that is when you join a new employer). In conclusion, it is possible you may not even know how much fees you may currently be paying to your current Super Fund.