Should I consolidate both my super funds before I retire?

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I am a 56-year-old woman living with my adult disabled son. I have around $150,000 with Aware Super’s high growth fund and another amount in PSS account which was opened in the mid-90s when I worked for a statutory authority for four years, comprising around $50,000 in an accumulation fund. I own my home and have no debts, and I currently work two jobs, amounting to just over $120,000. Should I consolidate my funds into an actively managed fund to increase my super balance over the next decade? I salary sacrifice $240 per fortnight in addition to my employer’s super contributions. I also wonder about rolling over into PSS accumulation as an alternative, as it is currently on the best performers list.

Commonwealth Super Corporation’s Public Service Super’s (PSS) aggressive fund ranks 6th out of 104 Growth funds (earning 8.2 per cent) over 5 years, according to SuperRatings’ latest figures, although it has slipped to 49th out of 112 funds (earning 10.9 per cent) over 3 years, all net of ongoing fees and tax.

If your retirement savings are split between different performing funds, its a good idea to consolidate them.Credit: Simon Letch

Remember this earnings rate only applies to your member contributions as your employer component, usually the largest portion of your $50,000, only grows at the rate of inflation, although that is a reasonable 7 per cent a year at present.

Aware’s high-growth fund, listed by SuperRatings in the same growth category with 77 to 90 per cent of growth assets, ranks 14th and 33rd over five and three years respectively. There’s not much between them in terms of performance.

For another alternative, AustralianSuper’s high growth fund, listed in the same growth category ranks 9th (8.1 per cent) and 10th (12.2 per cent) over the same periods. Life seems to have dealt you a difficult hand, but you’re doing well. Keep saving.

We currently have money invested in Vanguard’s index tracking ETF, VAS, in my wife’s name. This was intended for our son when he turns 25. Now we have a second child due in a couple of months’ time, we would like to do the same thing, but are unsure whether to double up on our current VAS investment or if it would be better to have two separate VAS kids accounts. My concerns are that we will then be paying two lots of fees for the managed accounts, and that these set managed funds they have for kids’ accounts haven’t historically performed as well as the VAS ETF. Are we better off setting up individual kids accounts or keeping it in one big pool and cashing out at the one time?

Your Exchange-Traded Fund (or ETF), with ASX code VAS tracks the ASX 300 Index and is one of the largest, if not the largest, by dollar value. Whether you have one or two kids accounts doesn’t really matter as the fee is a flat 0.1 per cent.

To open a Vanguard kid’s account, you must first have an account with their Personal Investor platform in your name, then open a kids account with minimum regular amount of $25 (otherwise $200). There’s no brokerage when bought through the platform.

VAS is invested 100 per cent in shares while the kids accounts are diversified funds, which is why it shows higher returns over the long term.

By the way, it’s not the lowest-cost equity-tracking ETF. That title is claimed by Betashares’ Australia 200 ETF (code A200), which tracks the ASX 200 Index, with a fee of 0.04 per cent.

Another option is Commsec’s Pockets, which invest in ETFs with more focused underlying shares (eg. sustainable leaders, health shares). The minimum investment is $50 with $2 brokerage but no platform fee. ETF management fees range from 0.09 to 0.36 per cent.

Having reached 65, I’ve stopped operating my small company which has no debts and accrued tax losses of about $600,000. I have $750,000 in a term deposit which is about to mature. Would it be more beneficial to move this cash into investment products held by my company so that any income or capital gains could be offset against the tax losses – or should I just put $660,000 of the cash into my wife’s and my super accounts respectively?

Don’t forget that tax losses can be basically divided into income and capital losses and never the twain shall meet. In other words, capital losses can be carried forward but only be offset by capital losses, and ditto with income losses.

Assuming you are carrying forward income losses, then yes, these could offset interest from a term deposit. But if the cash is in your name and not in the company, then you would need to extend a loan, with an arms-length interest rate, or contribute equity to the company.

Given the forecasts for recessions in the US and Europe, and possibly here as well, we can expect assets prices to be weak over the medium term. A term deposit in a solid bank, and not some unknown fund offering extremely high rates, would preserve your capital for a year or so.

After that, you can consider contributing to a balanced super fund. A recent household survey from the Melbourne Institute showed that 80 per cent of people aged 60 and over who died between 2014 and 2018 had no superannuation at all in the period up to four years before their death. For those aged 80 and over, the figure rose to 90 per cent.

The figures emphasise just how many people are outliving their savings, especially as life expectancies rise while the cost of ageing appears to be rising even faster.

• Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.

George Cochrane is a practising investment adviser.

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