superannuation in Australia but if I'm in the UK?

Hi all

I'm a little stressed with the whole idea of choosing and getting a super fund. With my new job I have no choice and need to get one. I am a self employed bricklayer and up to now I Havnt had super.

my concern is it is likely I move back to the UK in approx 4 years time, my understanding is because I am a PR and I am not on a temporary visa, my super can't go home with me, it stays here until I'm at the age to collect it.

what I can't find out is if I pay into super for the next four years and say I put in $20,000 do I still pay fees on this when back in the Uk and my concern is 25 years of fees I may be left for nothing? I have no idea about this and don't know who I should have super with.

I have asked CBUS who won't give me advice until I join them and I have asked NAB who say I have about 14 options which sound way too complex.

If anyone in the know can advise me it would be much appreciated, I'm all for having super but not if it will dissappear into fees over the years. The whole idea is to see it build and not dissappear. maybe there's a super I can get with minimum fees and the liklihood it will still grow?

Thanks in advance

David

A few things to point out about Super:-

1) It's compulsory so it really doesn't matter if you want a Super fund not

2) You don't contribute (unless you want to pay in extra). Your employer does (although beware some unscrupulous employers add the Super to the amount they're going to pay you and try to make it look as if they're offering more than they really are). The amount your employer contributes is currently 9.25% on top of your salary (before tax).

3) 15% tax is deducted from the amount paid into your Super fund as are the Super funds fees and (optionally) life insurance. If you don't want the life insurance make sure your super fund hasn't opted you into it.

4) If you want to pay in extra (not worth it if you're not planning to stay in Australia but I'll mention it anyway for others who might read this) the best way to do it is via Salary Sacrifice. That way the deduction is made from your pre-tax salary. You'll still pay 15% tax on it in your Superfund but that's less than you'll pay in tax on your salary. However once you exceed either the annual or lifetime cap on contributions no further tax saving is possible and you'll pay the same tax in your Super as you would on your Salary.

5) Unless you have a very small amount in your Super annual growth will normally exceed the fees by a considerable margin.

6) Returns by Industry Super Funds (such as CBUS) have historically been better than by Retail Funds (such as NAB) but there are some poorly performing Industry Super Funds that are worse than the best performing Retail Funds and I have no data as to where CBUS or NAB fit in the spectrum. In any case past performance is no guarantee of future performance.

One of the things you will also have to consider is the taxation of this super if you remain in the UK.  Currently if you draw your Super in the UK while it can be accessed tax free in Australia over the age of 60. However it is taxed in the UK as income you would pay tax on 90% of this  assuming you were above the UK tax free threshold.  This is changing in the UK to taxed at 100% but receiving the cash lump sum benefit of 25% tax free.

There is one avenue that I believe is available to super accrued up until April 2011( I also believe this includes earnings on this accrued amount post 2011). If you take out a lump sum from your Super that accrued up to this date then you can claim Extra Statutory concession A10 which allows this to be transferred to the UK tax free  any comments from anyone who has used this would be of interest. According to my source this has been grandfathered and can be used at any time.

an extract from HMRC below.

On ‎7‎/‎02‎/‎2017 at 5:13 PM, daveysing said:

If anyone in the know can advise me it would be much appreciated, I'm all for having super but not if it will dissappear into fees over the years. The whole idea is to see it build and not dissappear. maybe there's a super I can get with minimum fees and the liklihood it will still grow?

 

Thanks in advance

 

David

Hi David

Sounds to me like a low cost super with a multi-asset investment fund option might make sense in a situation like this (however see below re moving to UK).

You will just need to make sure it is invested in a risk profile you are comfortable with but if you have a 25 year investment time horizon then typically a fairly assertive option would make sense (as you would if investing in a UK pension).

With a low cost super fund there are typically two charges that apply.

Firstly a member charge which will be around $100 annually (give or take), this is paid to the Trustees/Administrators of the Super Fund to cover their costs of running the scheme. This is an explicit fee meaning that you will physically see this coming from your balance of money (it will appear on your transaction history in a statement or when you view online).

Secondly there will be an investment management fee, this is paid to the investment manager for making the investment decisions and managing the pot of funds in that particular investment, the management fee is known as the MER, management expense ratio. This is an implicit fee meaning that you will not physically see this fee coming out of the balance of your money and returns are declared net of this fee being deducted.

I will give an example of this based on C-Bus as you have mentioned them (NAB have a number of super funds so not sure which one exactly you are referring to).

Firstly the annual admin fee is $78, secondly the MER for their default investment option being the Growth fund (which is a multi-asset option which is fairly assertive) is 0.84%.

The below gives details of their past performance to Feb 28 2017, note that the 0.84% has already been deducted.

Therefore in this case so long as the returns achieve more than $78 dollars a year and 0.84% per annum you monies will not go down (assuming no contributions are being made), looking historically at investment markets for an assertive investment option over the long term returns on average would be 7%-8%+.

Now given your circumstance David a couple of points to note.

Firstly, as you are Self-Employed it is not compulsory to make super contributions: https://www.ato.gov.au/Business/Super-for-employers/Working-out-if-you-have-to-pay-super/The-self-employed/

Secondly, if you do then there will be no tax benefit to doing so unless you claim a tax deduction on the contribution and this may or may not be beneficial for you to do depending on what your taxable income will be for that financial year: https://www.ato.gov.au/Individuals/Super/In-detail/Growing/Claiming-deductions-for-personal-super-contributions/

Thirdly given that you have said it is likely that you will be moving back to the UK in a few years perhaps consider making payments to a UK pension fund instead, you may be able to get tax relief on your contributions (up to a certain amount anyway) and that way when you move back you could just continue paying into that scheme.

Hopefully my comments are food for thought David and please do take them as general comments only.

Good luck.

subscribing as would like to keep track of updates, and hopefully has some questions myself on a similar subject.

Thankyou all for taking the time to give me advice on this. much appreciated.