Is your super so super?

We had Ian & Mary here on Saturday for lunch after they went online for our advice. Their problem was their insurance premiums had increased so much & what could they do about it.

Here is the problem that they say 1 million+ Australians have

‘AustralianSuper insurance premiums to rise by 35%

Friday, 14 March 2014 11:35am

AustralianSuper will substantially increase its death and temporal and permanent disability (TPD) insurance premiums due to rising policy costs.

The 35% price hike is due to come in at the end of March and was confirmed by AustralianSuper group executive of membership Paul Schroder.

He told Financial Standard that the decision made due to the fact that policy costs had increased.

"Australia's super fund members have had access to relatively cheap insurance and are seeing premium prices rise across the board," Schroder said.

He added that Australia's largest super fund was also "thinking about the right level of default cover for new members" following the increase of claims and the losses suffered by insurers.

AustralianSuper was working closely with its insurer, TAL, to "find a middle ground, to try to reduce volatility and to avoid results changing dramatically depending on the market condition."

He revealed that representatives of the fund and TAL recently travelled to Zurich with reinsurer Swiss Re to look at solutions and strategies to tackle the issues that the sector is facing at the moment.

"We need to take a different view into the discussions and we need a good alignment between the trustee, the insurer and the reinsurer," Schroder said.

This price increase comes after AustralianSuper and REST lifted the cost of insurance to their members in the first half of last year.

The two super funds lifted the cost of insurance to their members increasing the cost of its death and total and permanent disability cover by around 38%, while the cost of income protection cover will increased by 25%

Retail industry fund, REST increased the cost of its death cover by around 45%, with TPD increased by 30% and income protection increased by 3%.’

 Why is this so?

We would argue lifestyle would be a major contributor as accidents make up a small % of all claims.

Ian & Mary are paying for others lifestyles &they  are not happy.

 Another reason they may not be happy is this fact we also read this week

Industry funds spend millions on advertising

Monday, 24 March 2014 11:45am

Industry superannuation funds are spending millions of dollars a year on advertising, with some funds' expenditure even exceeding that spent by banks on their own superannuation advertising campaigns, figures released by Nielsen show.

However, overall banks' advertising expenditure across their entire businesses still far exceeds that of industry superannuation funds.

According to Nielsen, between 6 January 2013 and 4 January 2014, AustralianSuper spent $9.37 million on advertising. The next biggest spender in the Industry SuperFund group was Cbus, at $4.84 million, followed by HESTA, which spent $2.75 million.

And also this week 

'One critic suggested that industry funds were "dipping into members' accounts". Another reader expressed surprise that industry funds could raise that sort of money when their member administration fees were so low.

But it does appear that the funds' actions are defensible. In Cbus' case all advertising expenditure comes from member administration fees. While Cbus' member administration fees are comparatively low - $1.50 a week - the fund has more than 700,000 members, giving an inflow of almost $55 million a year.

 AustralianSuper, with its two million plus members, garners almost $160 million a year in member admin fees. As not-for-profit bodies, this money cannot go to shareholders.

Speaking to Financial Standard, a reader questioned what benefit advertising brought industry fund members. "If you decide to sponsor something, it's generally because of a commercial reason. One would wonder what funds expect to get back from spending that money."

He speculated that the real aim of advertising was to increase funds under management, and questioned whether that was in the best interest of the members, in whose sole interest the not-for-profit funds must act.'

These facts certainly stressed Ian & Mary when we saw them.

Talk about a ‘silk purse from a sow’s ear??

Another problem & what really concerned them was having some life cover as estate planning for their children & grandchildren. The above super life cover expires before they probably do.

Ian & Mary were quite serious on moving to the Philippines where living is significantly cheaper.

We did not point out to them but another reason to be concerned is returns that other fund managers return.

We attended a Professional day last week & to quote Nicholas  ‘Buffett is not the only investment game in town.

You can invest with plenty of other, less well-known, market-beating investment managers.

These managers may have different styles from Buffett. But their biggest advantage may be that they manage a much smaller amount of money’.

e.g. 

Australian Shares Income Fund
Dedicated for pension / SMSF investors.
Best suited for investors who want:

Income focus

• 9.1% p.a. gross yield over the past 2 years*

Franking credits

• Over 2.3% p.a. franking credits over the past 2 years

Total return

• Over 21.7% p.a. over the past 2 years

All these returns were very good & these are not mentioned in the adverts that it us daily on TV or other.

Of course the past doesn’t mean future returns will be equally good.

Simon did call in on Saturday & we did show him far better returns that are available from this fund manager or many others.

 Why not call us on 07 3848 1088 or email us or visit our website to add ‘some yeast to your dough’.

Your biggest cost could be the difference in returns available elsewhere.

For once in my life we must agree with the world’s oldest profession

i.e. Don’t assume investors are rational, says Medcraft

‘Behavioural research shows investors are biased towards the default option, prefer a small reward today over a larger one later, tend to disengage when faced with complexity and are influenced by the relationship with the person delivering the message’

 We had to get all that off our chest as advisers are ridiculed in the media but strangely not by our clients.

Remember’ if we were in your position what would we do so that you are better off in three years time’.

We suggested one temporary solution & two more permanent solutions for Ian & Mary.

Who does your money vote for?

 

John McAuliffe