Innholdsfortegnelse for December 2019 i Money Magazine

Welcome to our year-end special issue. The Best of the Best features 114 reasons to be jolly (page 52). We’ve done the groundwork so you can get started on those pesky finance-related decisions that you may have been putting off for a while. The trick is to start small. We don’t expect you to read this magazine front-to-back in one sitting, but we do hope that you’ll keep referring to the relevant pages when you’re ready to tackle those subjects, whether it’s buying your next car, switching mobile plans or home loans, or investing in a managed fund. With the introduction of the “Protecting Your Super” reforms, we’ve taken extra care in covering the superannuation-related categories. If you can only tick one item off your checklist, make it your super.…

Can you believe it? Another year goes by. While it was a bumpy ride in the early months, the year panned out closely to my forecasts, and those of other commentators. The key factors were low interest rates, a growing number of jobs, stable levels of unemployment and a growing population. Australian shares, as measured by the All Ordinaries Index, went from 5700 to around 6800 at the time of writing. That is a nice return for the first 11 months of the calendar year. The big east coast cities had their first decent fall in home values in a long time in 2017 and 2018. With these factors in mind, one of my consistent opinions has been to buy property while the downturn lasted. But I was surprised by…

Super funds Sunsuper and QSuper have entered merger talks, as the sector continues to consolidate in a push to lower fees and increase the investment opportunities for members. The two funds have combined assets of about $182 billion, and a merged entity would overtake AustralianSuper as the country’s largest super fund. The Australian Competition and Consumer Commission is taking Google to the Federal Court. The regulator claims the tech giant breached Australian consumer law by failing to properly disclose how Android users’ data was collected. ACCC chair Rod Sims says transparency and inadequate disclosure issues involving digital platforms “remain one of the ACCC’s top priorities”. The Productivity Commission estimates mental ill-health and suicide cost Australia about $500 million a day. In a draft report on its inquiry into mental health,…

Each year, 345,000 small businesses open their doors in Australia. But there’s a lot more to starting a business – and making a long-term success of it – than simply having a money-making idea. The First Business app, from the corporate regulator ASIC, helps to bridge the knowledge and experience gap that many budding entrepreneurs face. While the app is focused on young people, it has tools and information that are relevant to anyone planning to open a business in 2020, regardless of age. Key features include a business health check to confirm you’re really ready to launch a business, plus a checklist of everything you need to consider, from registrations and licences to tax and super. You’ll also find networking tips and ideas, plus case studies that highlight what can…

Apart from the many lifestyle advantages, one of the big pluses of living and working in a regional area in your profession is the opportunity to earn excellent money while enjoying significantly lower day-to-day expenses. Living in government housing at $50 a week, while being able to rent your home for $615 a week, is a very obvious opportunity for you to build your asset base at a young age. First up, Brad and Stacey, is to do exactly what you are doing, meaning that you are not wasting the opportunity and you are actively managing your money. You have made a good decision to direct your rent into servicing your mortgage and then to add $800 a week from your income – this is around $42,000 a year, a…

• Mad Paws allows animal lovers to boost their earnings through a variety of pet-sitting options. • No formal qualifications are required though applicants need to complete a Mad Paws online training course. • Pet sitters set their own daily rate, and can potentially earn up to $1600 a month. • Each sitter creates a personal online profile, including reviews and client star-ratings. • The site is free to join. Mad Paws takes a cut of 20% of a pet sitter’s fee. • Competing websites include Pawshake, Spot the Dog Walker and PetCloud.…

When Georgia Wilkinson won the Herald Sun Aria competition for opera singers in October, her biggest thanks went to her mother for her unconditional support. Fighting back tears, Wilkinson thanked her mother for her love of music and putting in hundreds of hours driving her to singing lessons, performances and competitions. And when she lost confidence in her own singing career, her mother always believed in her and kept her on track. Now Wilkinson has a dazzling future as an opera singer. If you have a child who is obsessed with singing, sport, music, acting, painting, ballet, ceramics, writing or whatever they love, you want to be able to offer them the opportunities to excel in it. You never know where it will lead. Extracurricular activities can provide many new…

Bonds used to yield 14%, risk free. I know, imagine that today. At that time, bonds offered a risk-free yield some 10% higher than the risky yield on equities of between 4% and 6%. Former Fed chairman Alan Greenspan raised interest rates to pre-empt, rather than respond to, inflation. From that moment, inflation, and the long-term trend in interest rates, began to fall – and they are still falling. Over the past 30 years the yield on bonds has dropped from 14% to 1% while the equity market yield, including franking, has remained between 4% and 6%. As it stands now, equities yield 2.94% more than bonds, and after another 1.39% for franking they yield 4.33% more than bonds. Now let’s add insult to injury and take into account inflation.…

The “good times” for the Australian economy have continued for the past 28 years and during this period of uninterrupted growth we have had jobs growth to match. Looking at the job numbers over the past few years, you would understand why many call Australia the “lucky country.” In just the past three years we have created almost a million new jobs and in the past five years the unemployment rate has dropped from a peak of 6.4% in October 2014 to 5.2% in September 2019. But as we head into 2020, we face a vastly different scenario. It is clear the economy is rapidly losing momentum. In annual terms, economic growth has slowed from 3% a year ago to just 1.4% in the second quarter of 2019. The slowing…

We have long warned that the near-term outlook for banks would deteriorate. In the long term, of course, the population of Australia will double and the banks will write many more loans. Initially it was the Murray inquiry’s recommendation that banks be “absolutely strong” and raise additional capital that lowered their returns on equity. Imagine being asked to inject significantly more capital into your business, with no change to revenue or earnings, and you see the implications. Then, following the financial services royal commission, increased compliance and remediation payouts ensured costs for banks would rise and margins fall. Meanwhile, additional compliance also ensures credit growth slows because banks must take longer to conduct due diligence on applications. Deteriorating economic conditions heap burning coals on the banks. Heavily indebted households have…

GOLD WINNER MAGELLAN The Magellan Global Fund is the winner this year, after coming equal second last year and equal first in the three years before that. It invests in 20 to 40 companies that it describes as “outstanding”. Its research shows these companies are able to sustainably exploit competitive advantages to continually earn returns on capital that are materially in excess of their cost of capital. The fund doesn’t shy away from companies that have relatively high price-to-earnings and price-to-book multiples, provided their businesses are outstanding and their shares are trading at an appropriate discount to their assessed intrinsic value. Magellan Global aims to outperform the MSCI World Net Total Return Index and has achieved this with 93% efficiency since inception in 2007. The Nikko Asset Management Global Share…

GOLD WINNER PENDAL The Pendal MicroCap Opportunities Fund invests in a portfolio of 40 to 60 Australian companies with market capitalisation of less than $150 million (at initial investment) that it believes are trading below their assessed valuation. A cornerstone of the manager’s investment philosophy is the view that markets are not always rational and the inefficient pricing of securities creates investment opportunities. This is particularly the case in micro caps, where the sector is under-researched and sentiment will often drive periods of undervaluation and overvaluation. The OC Micro-Cap Fund is next in line, having shared second place last year too. It’s designed for investors seeking portfolio diversification and strong capital growth over the long term. In seeking to achieve this, the team invests in 25 to 60 micro-cap Australian…

GOLD WINNER LA TROBE FINANCIAL La Trobe Financial’s 12-Month Term Account should be well known to Money readers. It won Best Mortgage Fund for 10 consecutive years and is now a gold winner for the 11th time under the category of Best Credit Fund – Mortgages. The fund invests mostly in Australian property credit secured by registered first mortgages with a small strategic allocation to cash (2.9% as at November 2019). It pays distributions monthly (currently at 5.05%pa) or you can reinvest these distributions for a compounded return (5.17%pa). La Trobe says the fund is positioned to “deliver capital stable, income-producing investments that are so important to investors today”. It’s been designed with both the short-term and long-term investor in mind. Investors can stay just for the one 12-month period…

GOLD WINNER FIDELITY The Fidelity Global Emerging Markets Fund is the inaugural winner of this category. It invests in a concentrated portfolio of 30 to 50 companies in emerging markets. To choose its investments, Fidelity conducts a rigorous bottom-up stock selection process that focuses on companies that it believes are well positioned to generate returns through market cycles and have demonstrated a track record of strong corporate governance. China (27.3%) and India (11.5%) are the two biggest geographical areas where it invests. The fund’s benchmark is the MSCI Emerging Markets Index, which it has beaten by an average 3.13%pa since inception in December 2013. In second place, the Capital Group Emerging Markets Total Opportunities Fund (AU) has a multi-asset approach that offers the flexibility to invest across the full spectrum…

GOLD WINNER SPDR SPDR S&P/ASX 50, the large-cap Australian ETP, gives investors access to the 50 biggest and most liquid shares listed on the ASX. As well, the winning ETP provides exposure to the big dividend payers such as the four banks, BHP, CSL and Telstra. The SPDR fund paid out a dividend yield of 5.58% over the year to the end of September 2019. The rest of the 15% return was capital growth and realised capital gains. The ETP is one of the oldest on the ASX, having been launched 18 years ago. It pays out a quarterly income and charges a fee of 0.28%. If you had invested $10,000 in 2001, it would have been worth $43,131 at the end of September 2019. In second place is the…

BEST PENSION FUND GOLD WINNER CBUS DAVID ATKIN CEO, CBUS The Best Pension Fund for 2020 is Cbus. Based in Melbourne but with a national reach, it manages almost $54 billion on behalf of 761,000 members. With almost one in 10 aged over 60, looking after members who have retired, or who join as retirees, is becoming an important part of what it does. Cbus isn’t the only fund experiencing this growth in demand among retirees. But funds as large as Cbus that have been around for as long are better placed than others to respond. Cbus started out in 1984, looking after the superannuation of people who worked in the construction and contracting industries, but has since expanded into looking after the super and retirement of people all over…

GOLD WINNER SUNSUPER Lifecycle superannuation products typically reflect the average member age in a group of investors. As you approach retirement, for example, your super is generally shifted to a less-risky asset allocation so you don’t have to worry as much about the ups and downs of markets. MySuper lifecycle products now account for $300 billion, or 40% of the total MySuper market, growing 21% in the year to June 2019. And a quarter of this money is owned by millennials, says Rainmaker Information. Winning the category is the Sunsuper for Life product, which has produced double-digit returns for almost every age group over the past three years – except for people in their 50s, but even then 9.54% is nothing to sneeze at. Sunsuper has history on their side,…

GOLD WINNER COLONIAL FIRST STATE Investing in any of these products over the past three years would have netted you a healthy return and given your savings a nice boost – but probably with a high level of risk. This is a category built purely on the premise of investment performance, and what it doesn’t show is the importance of having one or two of these products in your super. Rainmaker Information analysis has found a two-to-one ratio gap between the best and worst performing super funds in the market over the 10 years to June 2019. It means if a poor-performing fund has failed to select the right investment options it could cost the average worker $567,000 over their lifetime. Winning this inaugural award is the Colonial First State…

GOLD WINNER QSUPER Q Super has dominated both the balanced super and pension categories for the Best of the Best 2020 awards. It’s a testament to the fund’s investment approach, which is vastly different from that of its peers. With arguably less risk, it still manages to be among the best performers. Consumers who have been watching the super industry closely will know that QSuper invests with a higher allocation to fixed interest and is less exposed to shares than your typical balanced super fund. This has helped it to deliver double-digit returns on its balanced super products over one, three and 10 years. QSuper’s Aggressive accumulation account might sound like a growth fund but, when you look deeper into its asset allocation, it is well and truly a balanced…

Returns vary year by year depending on market conditions. What is a good return this year may not be so good next year. To help you make sense of this, super funds publish their investment return targets so you can get a sense of what they are aiming for. For example, most MySuper products used by employers aim to beat inflation over the long run by 3%-4%pa. With inflation being now slightly less than 2%pa this means they aim to achieve long-run investment returns of 5%pa or more. SelectingSuper says most super funds don’t just match their investment target, they beat it and sometimes by a wide margin. But even if a super fund beats its target, we still end up looking for the top performers. Viewed another way, a…

GOLD WINNER HESTA Superannuation funds that offer an investment product focusing on environmental, social and governance (ESG) factors are performing just as well as, if not better than, as their peers, according to the latest research. In the 12 months to April 2019, balanced ESG investment options outperformed other balanced super offerings, says researcher Rainmaker Information (the owner of Money). Last year you would have found many of these products listed in the Best Green Super Funds category. This year we’ve expanded the category to rank the best super products that invest according to ESG principles including ethical, green, sustainable, social impact or renewable energy themes. The products were then listed by the best-weighted ranking of their performance over one, three, five and 10 years. The products must have had…

GOLD WINNER HOSTPLUS SELF-MANAGED INVEST You don’t have to be a member of Hostplus to access its power-packed investment choices. It’s no secret what has propelled Australia’s most successful super funds to the top of the performance league tables: diversified investment strategies and a willingness to make smart long-term investments in infrastructure and direct property. The catch was that until now you had to join these funds as a member to access these investments. Not anymore. Hostplus is one of the most successful and consistently high-performing super funds of the modern era. Now its investments are open for self-managed super funds (SMSF) through Hostplus Self-Managed Invest. SMSFs can invest into a mix of six of Hostplus’s celebrated investment options: balanced, indexed balanced, infrastructure, IFM Australian infrastructure, property and Industry Super…

Retired couple get an electric shock I really enjoy reading your magazine. However, there is one thing I have never heard you mention. When one retires, one also needs to revise the home electricity budget! I remember that it was quite a shock to me and my husband to discover just how much our power bill increased when we were both at home full time. Heating/air-conditioning, TV, radio, computer, kettles and so on being used all day adds up. Virginia Bank comes to the party on interest rates I have been an avid reader of, and subscriber to, Money magazine for many years. I loved Paul Clitheroe “In your interest” article about interest in the August 2019 edition. I made an appointment with my bank manager (one of the big…

Consumers would do well to double-check their life insurance policies, including those held inside super funds, to make certain they’re not paying for what is essentially junk insurance. Regulator ASIC says about 500,000 Australians, including many who work in casual roles or high-risk occupations, are currently covered by a total and permanent disability (TPD) policy that is too narrow in definition. The policy only pays out in the most catastrophic circumstances, whereby claimants “are unable to perform several activities of daily living (ADL cover) such as feeding, dressing or washing themselves”. It’s one example where ASIC believes there are design flaws in TPD insurance and the claims-handling process, meaning “consumers can’t rely on this cover when they need it most”. The regulator goes on to say that 60% of claims…

On my mind is how to engage in more conscious spending this Christmas. Whether it be for corporate gifting, presents for family and friends or something for the self – there are so many initiatives beyond the standard festive clutter that will make a real difference (and people love to receive). Think fewer generic hampers and more “experience” gifts – like a donation that shelters a homeless person for the night or the “Buy from the bush” initiative, which supports drought-affected families. These are feel-good, tax-deductible wins for everyone – company, sole trader or worker bee alike. Our politicians are pushing us to spend and there’s no harm in that, but if we can use cash boosts for meaningful consumerism, the economic advantages could be far more powerful than any…

If you’ve invested in vacant land with a view to building an investment property on it, the tax deductions you can claim have changed – and not for the better. Since July 1, 2019, expenses associated with holding vacant land are no longer deductible, even if you already owned the land at that date. Previously you could claim deductions on land purchased with the intention of building a property to rent, such as loan interest on money borrowed to finance the acquisition of the land and construction of the property, council rates and other holding costs, such as insurance. To claim the deduction, it was simply necessary to demonstrate that genuine steps had been taken to build the dwelling and make it available for rent as soon as it was…

Steven Hui always flies at the pointy end of an aircraft. It’s not that he’s loaded. Rather, he has cracked onto a system for using frequent flyer points after stacking up plenty of them while working at Macquarie Bank. He set up iFLYflat seven years ago, and now shares his secrets by booking free business and first-class seats for customers of his travel agency. He’s leading the high life as a business owner, as those who follow his exploits can see from the frequent travel snaps he posts online. “Because I’m accounting and finance minded, there’s nothing I like more than a bargain,” says Hui. “This seemed to be the biggest one of them of all. You can collect frequent flyer points for no effort and trade them for something…

My wife and I are both 37, and we have two kids, a son, aged four, and a daughter, aged two. Our son heads to school in 2020 and we both care for our daughter around work, although she does attend day care two days a week, costing us $140 a week. Both kids will attend public school. We live rural in government regional officer housing (GROH), costing us roughly $50 a week, and will do so until the end of 2021. We are currently renting out our principal place of residence for $615 a week before fees, etc. The monthly rent goes straight into servicing our mortgage, as does $800 weekly from our income. We owe $345,000 on our mortgage ($640,000 house value) and have $60,000 in an offset…

WHAT WE KNOW The Coalition promised it would do just that if it won the May election and the details of its First Home Loan Deposit Scheme were announced in October. The scheme will allow up to 10,000 first home buyers a year to get a home loan with a deposit of just 5%, instead of the standard 20%. Normally, if you wanted to borrow with a deposit of less than 20% you’d have to purchase lenders mortgage insurance to cover the shortfall. The costs of this will vary, but as a rule of thumb the insurer Genworth estimates you’d pay around $16,000 on a $500,000 home loan with a 5% deposit ($25,000). Under the scheme, the government will guarantee the 15% shortfall, effectively eliminating this extra cost. That’s a…

Is your Christmas budget being trampled by the herd instinct? Being a young consultant in a large consultancy is not glamorous. You regularly work 16-hour days and the pay is modest. Years ago, as a junior behavioural economist, this was my predicament. With this financial situation in mind, I remember facing the Christmas season with a mix of anticipation, fear, anxiety and excitement all rolled into one. There are presents to buy, functions to attend, holidays to organise, people to impress, plus all the other usual life expenses that don’t abate. I needed to maintain a tight budget in order to avoid incurring mountains of debt. But never fear – I had a plan. One year, five weeks out from Christmas, I drew up a budget and made a commitment…

Are you considering building a house either to live in or as an investment property? How long do you expect it to take? The usual answer is 12 months or more, but what if you could slash that time to a few weeks, improve energy efficiency and cut costs at the same time? Welcome to the world of prefabs, where all or part of the building has been manufactured offsite in a factory. Prefabrication is a complementary system to traditional construction and comes in all shapes and sizes, from components such as wall frames, roof trusses or insulated wall panels to modular construction and complete buildings, says the industry body prefabAUS. Prefabs are transforming our built environment, decreasing construction times and waste while increasing quality, productivity and affordability, it says.…

It’s been a turbulent year for superannuation. Both the Productivity Commission and the financial services royal commission shone a light on how the $2.9 trillion system failed to identify and address the shoddy deals dished out to too many consumers. It’s estimated there are more than a million dud default funds draining fees out of members’ accounts. But those days are numbered. Apart from the avalanche of class actions that have followed, and will act as a deterrent, the Australian Prudential Regulatory Authority (APRA) has been given stronger enforcement powers to do something about it. It will act against super funds that breach their obligations to members, including the duty to act in their members’ best interests. It will also enable APRA to intervene early “before members suffer significant harm”.…

Unless you have been hiding under a rock somewhere, you’ll know that the Reserve Bank’s official cash rate is at a record low. Which is wonderful news if you have a mortgage (just don’t expect the banks to pass the reductions onto credit card holders). If you have cash in the bank … well, chances are your interest rate is already either at zero or well on the way. Don’t expect too much love from the politicians, either. But, then, you’re used to that. If the aim of low rates (and, in the US, quantitative easing) was to push people up “the risk curve”, then you’d have to say it’s mission accomplished because a 0.1% in an at-call savings account isn’t going to pay the bills in retirement. Which leaves…

“I’d put the $50 on 23 red at the casino” What was your first job? Mowing lawns and doing gardening for my neighbours in Dubbo. If I think I’ve had a tough day I look back to working in gardens in 40-degree heat. It was my own business and we lived on the outskirts of town and a lot of people had one- to two-acre blocks. It was enough money to get me through Years 10, 11 and 12 before buying a Ford Cortina and moving to Sydney. What’s the best money advice you’ve received? I’ve done a lot of work with financial planners and in my role as a keynote speaker I get to talk at conferences around the world, but this is a simple one – spend less…

GOLD WINNER LEGG MASON These funds suit investors looking for better income returns than they can now get from term deposits. The winner, the Legg Mason Western Asset Australian Bond Fund, is an actively managed Australian bond portfolio that invests across Australian government and semi-government bonds, corporate bonds and asset-backed securities. It currently has 55% invested in corporate fixed income and 37% in government bonds. The manager has a strong focus on risk management through credit research, diversification and investment guidelines. The fund aims to outperform the Bloomberg AusBond Composite 0+yr Index over rolling three-year periods and has consistently achieved this. Coming second, the Nikko AM Australian Bond Fund invests in a diversified portfolio of investment-grade Australian fixed-income assets, aiming to deliver an active return for a passive fee. It…

GOLD WINNER CHARTER HALL These funds play a key role in providing income for investors. The winner, the Charter Hall Maxim Property Securities Fund, gives them exposure to a mix of quality listed A-REITs that own assets across the retail, residential, commercial, industrial and real-estate-related social infrastructure sectors. It aims to outperform the S&P/ASX 300 A-REIT Accumulation Index by 1.5%pa over rolling three-year periods while also striking a balance between growth in the value of its units and income for investors. Since inception it has produced an average return of 5.95%pa, including 3.44% income. The Cromwell Phoenix Property Securities Fund, which also came second last year, gives investors exposure to a broad range of ASX-listed property stocks holding underlying investments including office, retail, industrial and hotel assets. It has returned…

GOLD WINNER PM CAPITAL These funds provide investors regular income at rates that beat those currently offered by term deposits. The winner, PM Capital Enhanced Yield Fund, aims to create long-term wealth through identifying and profiting from market anomalies mainly in corporate bond, hybrid security and other compelling debt market opportunities around the world. It aims to outperform the Reserve Bank cash rate – and has done this consistently – providing investors with regular income with a low degree of volatility and minimal risk of capital loss. It pays quarterly dividends. The Janus Henderson Diversified Credit Fund is an actively managed portfolio of Australian and global higher-yielding securities, seeking to provide investors with a diversified exposure to a wide range of fixed-income securities. The fund seeks to achieve a total…

Investors seeking diversification can no longer afford to ignore emerging markets such as India and China. They are now among the key drivers of the global economy, accounting for almost 60% of the world’s GPD. These countries, which also include Brazil, Russia, Mexico, Indonesia, South Korea, Turkey, Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa, account for most of the world’s population, including an estimated 90% of the under-30s. Many are experiencing the rapid rise of a well-educated middle-class workforce as they transform from rural-based economies to urban-based goods and services providers and consumers. Emerging market tech companies – such as Samsung, TSMC and Tencent – are among the most innovative and fastest growing in the world, driven by young, increasingly affluent and tech-savvy populations.…

GOLD WINNER MAGELLAN The Magellan Global Equities ETP is a standout performer. Its concentrated portfolio of 20 to 40 global companies is a listed version of its successful, longstanding unlisted flagship Magellan Global Fund. Magellan has attracted $1.4 billion since it pioneered the new category of non-transparent active ETP in 2015. By listing on the ASX, the Magellan fund can be conveniently purchased by investors bypassing intermediaries such as financial planners and platforms. Hamish Douglass, the founder, chairman and chief investment officer of Magellan, is a big fan of “technology winners” that are set to profit from innovations such as cloud technology, e-commerce and artificial intelligence over the next 10 to 20 years. These include consumer tech platforms such as Alphabet, Apple, Microsoft and Facebook. Second placegetter SPDR MSCI World…

SuperBooster Money’s SuperBooster project wants to get Aussies more involved with their retirement savings. Visit moneymag.com.au/superbooster for a checklist to make sure your super is healthy. There’s a guide on how to claim your contributions at tax time and tips for casual workers who want to top up their balance. Follow #SuperBooster and check, consolidate and contribute. SelectingSuper Confused about how you can compare super funds? The SelectingSuper website gives us the tools we need to find the best fund. Owned by Rainmaker Information (the publisher of Money magazine), SelectingSuper offers online calculators, fund comparisons and lists of the top superannuation funds. It also publishes The Good Super Guide each year. Retirement Starts Today Hosted by financial adviser Benjamin Brandt, this podcast may be American-focused but some episodes are also…

GOLD WINNER AUSTRALIANSUPER Savings invested in MySuper (default) products now accounts for more than a quarter of Australia’s $3 trillion super system, and it’s growing twice as fast as the overall system, analysis from Rainmaker Information shows. Given the large role that MySuper plays, it comes as no surprise that Money’s best super fund for 2020 is also the winner of the best MySuper products. AustralianSuper has always been among the top-performing funds, whether it’s over one, three, five or 10 years, and it’s no easy feat in a hotly contested market. This year its balanced (MySuper) product delivered its 10th consecutive year of positive returns for members. Narrowly missing the top gong and coming in second is the Hostplus balanced product. It’s almost splitting hairs when you compare the…

GOLD WINNER EQUIP PENSIONS Australia’s 13.5 million superannuation fund members pay, on average, $2400 each year in fees. It’s more than the average household energy bill. And research from Rainmaker Information also tells us that, on average, Aussie retirement products charge fees of 1.33%pa. And, as with your energy bill, it pays to shop around. The cheapest retirement products on the market are Equip Pensions and ANZ Smart Choice, both charging 0.64%. Industry fund Equip edges out retail competitor ANZ on five-year performance, so it gets the nod as winner of Money’s Best of the Best 2020 award. Industry fund AMIST takes third place with its pensions product. Rainmaker notes that gross super fees fell for the first time in six years during 2019. Super fund members are now paying…

GOLD WINNER QSUPER For the past decade balanced pension (retirement) products in Australia have returned an average of 8.7%pa, according to the latest release of the SelectingSuper Balanced Index. What this tells us is that the group of finalists in this category are truly leading their field, each outperforming the 10-year benchmark by almost 2%. The same can be said when looking at returns for three and five years. The QSuper Income – QSuper Aggressive product reflects the nature of most balanced investment options – they’re taking on more risk, just not at the highest levels. What makes the winner a standout is its double-digit returns over one, three, five and 10 years – and the ability to achieve them with a relatively high allocation to fixed interest. AustralianSuper’s Choice…

Money magazine has a great online resource that explains how to boost your super savings. The SuperBooster project encourages all Australians to check, consolidate and contribute to their superannuation. The project runs into early 2020. For more information visit.moneymag.com.au/super-booster. ASIC’s MoneySmart website also has some great tips if you’re thinking about transferring or consolidating your savings. It says it’s important to check: • If changing funds will affect how much your employer contributes. • The impact on your retirement benefit if you’re in a defined benefit fund. • That you’ve notified your employer to make future contributions to your new fund. • That you’re not losing insurance benefits you want to keep. • The exit fees of your old fund.…

GOLD WINNER TASPLAN Retirement income specialist Challenger says there is now more than $800 billion in the super accounts of members aged over 65, representing more than 28% of total assets in the super system. Its latest research tells us that the average balance per retired member in industry funds is $305,000, which is nearly 20% higher than the average of $255,000 in retail funds. It’s also not surprising, then, that the top five best moderate pension products are all from industry funds. Tasplan might be one of the more expensive pension options in our top five (for a $250,000 balance), but its double-digit return over the past three years make it a top-shelf fund. This year it is a double gold winner: for both the best moderate pension product…

GOLD WINNER VISION SUPER Do-it-yourself is a term that’s commonplace among super funds nowadays as investment-savvy members attempt to gain more control over where and how their money is invested. More APRA-regulated funds now offer multi-choice platforms that allow members to choose from a range of premixed investment options or trade directly in shares, and to weight their asset allocation accordingly. Some super funds will predetermine the asset allocation within each pre-mixed investment option to ensure it meets its objective, but the emphasis remains with the fund mem ber’s choices. Over the past five years there’s been an increase in these options with mixed results for consumers. This short time frame hasn’t always allowed these products to flourish under the main goal of long-term investing. However, there’s enough shift and…

GOLD WINNER ANZ Even among low-cost super funds, young people pay on average twice the fees older people pay and the insurance premiums they are charged, as a proportion of their account balance, can be four times higher. This isn’t fair, which is why some of the leading funds decided several years ago to do something about it. To give young members a better deal – just as other funds were increasing their member fees and insurance charges – these funds set about reducing them or introducing special arrangements for people under age 25 to make insurance voluntary. Others went further. They set up special higher-growth investment choices that would ride the share and property markets better than funds aimed at older people. The super fund that has done this…

FROLLO If you want to monitor your bank accounts, credit cards and loans, super funds and other investments all in one place, Frollo could be the app for you. It syncs with your Australian bank accounts to monitor your balances and spending, and allows you to set savings goals. You can also tag tax-deductible expenses to make life easier at the end of the financial year. THE MONEY CAFE WITH KIRBY AND KOHLER James Kirby and Alan Kohler host this weekly finance podcast on the latest news in business and finance and what it will mean for investors. Recently they’ve tackled how low rates will go, the kind of investing world we live in, and the hard-to-believe housing rebound. The Money Cafe is produced by The Australian and has a…

GOLD WINNERS BANK BANK FIRST MAJOR BANK BANKWEST NON-BANK COLES Bank First’s Visa platinum credit card brings low rates and platinum service together. InfoChoice’s Jason Bryce describes it as a great all-rounder. “It offers a low rate, a low annual fee plus lots of extras, like complimentary international travel insurance.” Since our judging Bankwest has actually cut its purchase rate to under 10% and still waives the annual fee for the first 12 months – a saving of $99. The Coles Low Rate Mastercard also recently cut its purchase rate by 0.2% points to 12.99%, making it even better value. It also combines your flybuys card with a credit card.…

GOLD WINNERS BANK BANK OF QUEENSLAND NON-BANK VIRGIN MONEY Non-banks are again offering the best value for money when it comes to rewards credit cards. Virgin Money’s Velocity Flyer card has several introductory offers depending on whether you’re chasing extra Velocity frequent flyer points, want a discount on purchase rates or want a long balance transfer. If you take up the bonus points or purchase rate offer, you will only pay half your annual fee in the first year ($64, then $129). Among the banks, Bank of Queensland’s Blue Visa card takes top position with a low annual fee of $60. As at November 2019, if you sign up you get $120 cashback if you spend $500 a month on retail purchases for the first three months. You also earn…

DAVID THORNTON David is our staff writer at Money. He says: “I’ll be making a donation to the bushfire relief effort. It’s just heartbreaking to see this kind of loss of property and life, so whatever small contribution I can make to ease the pain is money well spent.” SHARYN MCCOWEN Sharyn, our online content producer at Money and says: “The only gift my beautiful mum will ever request is ‘a book and time to read it’. I’d love to give her all the R&R she needs as a thank-you for everything she does for us.” ANN LOVEDAY Money’s art director Ann says: “A little party in the back garden with friends is my idea of a fullfilling festive time. Sharing delicious homemade food and sunshine with new friends and…

This time every year I get asked what was the biggest issue in financial services for the past 12 months. For me the answer is customer remediation. Financial institutions (not just the big four) are attempting to right past wrongs by paying hundreds of millions of dollars back to consumers, and it’s hitting these institutions where it hurts. While this is certainly a good outcome for consumers, I’d suggest they see it as a token gesture and not much else. In our October issue you would have read that, depending on the circumstances, you can be taxed on your remediation payment. What another kick in the guts to those who had previously been ripped off through no fault of their own! The financial services industry could have played its remediation…

Bestselling author and finance expert Noel Whittaker is again teaming up with aged care expert Rachel Lane for a book that looks at how best to “rightsize” your home later in life. The pair say downsizing isn’t just about about the square metres. They guide you through the legal and financial maze, and explain how a move can affect your lifestyle, super, pension and other benefits. They also share real-life stories from readers of their other books. Whether you’re moving to a townhouse or apartment, granny flat, tiny house or a retirement community, listen to the experts and make it a successful transition. Ten readers can win a copy. In 25 words or less, tell us what your ideal “downsizing” home would look like and in what suburb. Enter online…

Steven Hui Travel expert and co-founder of frequent flyer booking service iFLYflat. Age 43; married; lives in Sydney’s Chatswood; family migrated from China. First experience at saving was a school Dollarmites account. Bought shares thinking he could make more than cash in the bank, but says he wasn’t good at it. Reinvests in his business. Leisure is important: “I’m not earning as I used to, but I have a much better lifestyle.” He and wife Anna don’t have kids, and he doesn’t focus on building assets.…

If you love canines, here’s a chance to earn some extra cash. Mad Paws (madpaws.com.au) connects pet sitters with dog owners needing home-based care for their pooch or some doggy day care to keep them active and entertained. Mad Paws has a screening process for would-be sitters but formal animal husbandry skills are not required. Where to start Australians are big fans of pets, and that means plenty of business opportunities. RSPCA figures show we collectively share our lives with 24 million pets, the most common being dogs. Almost two out of five households own a dog and, faced with long working hours and shrinking backyards, demand for dog walkers, sitters and minders is streaking ahead faster than a beagle chasing a ball. If you like the idea of working…

There are some simple things we can practise to avoid being financially trampled by the herd instinct. These are intentionally simple to reduce cognitive effort in the moment of decision making (otherwise you will be powerless against the pressure of the herd). Follow these three rules to avoid the stampede on your budget. * Cash is king. Instead of “tapping”, cash helps you keep track of your spending and also means you’re less likely to be the one carrying the tab if bills can’t be split. * Articulate what your budget is out loud early. By doing this you clearly set expectations, avoid getting stuck in unwanted spending situations and make your budget the reason for not wanting to spend rather than anything personal. * Be OK with suggesting cheaper…

• Approach lenders early and explain the process of building your modular home so they can see that it’s just like any other newly built property. • Compare lenders. While some may be hesitant to lend you funds for a modular build, there are some that will allow you to release funds before the modular home is positioned on site. • Obtain flexible finance terms from the builder. Some builders will build your modular home with a progress payment plan as long as your loan has been approved. • Offer equity or a guarantor. If possible, offer any existing equity that you have as collateral for the loan. Another solution is to ask a relative to act as guarantor.…

While greater disclosure is welcome, it is not a magic cure when it comes to financial services. The Australian Securities and Investments Commission (ASIC) recently released a joint report with the Netherlands Authority for Financial Markets identifying its limitations. “Financial services disclosure has traditionally been assumed to inform us (as consumers), help us make ‘good’ financial decisions and drive competition,” it says. Its report focuses on the real-world context in which disclosure operates. It shows that, and explains why, disclosure and warnings can be less effective than expected, or even ineffective, in influencing consumer behaviour. In some instances, disclosure and warnings can backfire, contributing to consumer harm. Melissa Birks, from AIST, says the report shows disclosure can have perverse outcomes and achieve the opposite of what is intended. “While disclosure…

My view is that discretion is the better part of valour here. It’s likely that the best yields come with unacceptable business risk, share price risk, or both. “But I can get a higher yield elsewhere” might be a common refrain, but it could well be a case of being careful what you wish for – you might just get it. We want an operating business with a reliable, regular customer base, that’s not too expensive but offers a decent yield. Every income portfolio should be broadly diversified, and if we’re looking to add a company – despite the vagaries (and volatility) in its business – Flight Centre’s 4.6% trailing (and fully franked) yield earns it the nod.…

You’re in for a treat. This year’s Best of the Best is an impressive assembly of the leading financial products and services in Australia today. The hardest part is deciding where to begin. We recommend you start with three household expenses that take up a big slice of your income, such as your home loan, insurance and credit card payments. If changes to big-ticket items feel too confronting, start small. We’ve got the best mobile and internet plans, children’s savings accounts and short-term deposits on our list, too. Get-rich-quick schemes have no place at Money. Instead we aim to help our readers make informed decisions by narrowing down all the choices to a more manageable shortlist. The methodology section and the tables will explain to you how we’ve come up…

THIS ABUNDANT LIFE The Joyful Frugalista, Serina Bird, has teamed with strategic policy consultant Kirsti McQueen to share tips for living a fulfilling and prosperous life. In conversation with a series of guests, the hosts delve into early retirement, sustainable living, spending, saving and investing. Launched in August, these half-hour episodes make easy listening despite some complex topics. HEADSPACE One of the best investments you can make is in your mental health. The Headspace app offers mini guided meditation sessions and techniques to practise mindfulness, all aimed at bringing calm and balance to your life. Co-founded and conceived by meditation teacher Andy Puddicombe, the app costs $US12.99 (about $19) a month or $US94.99 a year, and includes progress trackers and reminders. WE STUDY BILLIONAIRES Hosts Preston Pysh and Stig Brodersen…

You need to be highly selective when you invest in managed Australian share funds, as many of them fail to hit, let alone exceed, their benchmark. In the 12 months ending June 2019, Australian large-cap equity funds recorded an average return of 6.3%, well below the gain of 11.6% by the S&P/ASX 200, according to the SPIVA Australian scorecard, compiled by S&P Dow Jones. Of the funds in this category, 93.2% and 96.3% failed to outperform the benchmark, the S&P/ ASX 200, on absolute and risk-adjusted bases, respectively, over the 12 months. And this is not just a one-year phenomenon. Over five, 10 and 15 years, 80.63%, 82.56% and 84.05% respectively have been outperformed by the S&P/ASX 200 based on absolute return, according to the scorecard.…

Investment in fixed-interest funds, both listed and unlisted, is super hot, with a surge in demand this year. Many investors have cut their allocation to equities and term deposits and moved into fixed-income funds as fears of a global recession mount and interest rates remain at historic lows. Jeff Johnson, head of the fixed income group at Vanguard Asia-Pacific, says there is no doubt that demand for fixed-income securities has been very strong. “This could be attributed to a range of factors including the growing concern around the risk of a recession, thus causing investors to seek out high-quality, liquid, safe havens that are likely to provide protection in the event of a market sell-off in equities,” he says. “Another observation is around the chasing of returns. Both fixed-income funds…

GOLD WINNER LEGG MASON The Legg Mason Martin Currie Real Income Fund Invests in Australian listed companies owning real assets – including property, utility and infrastructures securities – that deliver strong dividend income from reliable revenue streams. It targets income growth that exceeds the rise in the cost of living by owning securities that can grow revenue and profit over time. The fund has returned an average 16.56%pa since inception in 2010. Its projected income yield over the next 12 months is 5.51%. The Magellan Infrastructure Fund, which placed second, invests in a structured portfolio of 20 to 40 investments which the manager believes provide sufficient diversification to ensure that investors are not overly correlated to any single company, industry-specific or macroeconomic risk. It has returned an average 9.21%pa since…

Income funds are designed for both risk-averse investors and those who want to hold part of their portfolio in a low-risk option that offers better returns than those currently available from term deposits. They particularly suit retirees and others who have to live on a fixed income. When choosing a fund, it’s important to pay attention to fees because the impact of costs on relatively low-returning funds, such as this category, can be high. But also keep in mind it’s usually acceptable to pay a higher fee for a superior return. Also check how often the fund pays distributions, as regular income is important to most people who invest in these funds.…

GOLD WINNER IOOF This year’s winner, the IOOF MultiMix Balanced Growth Trust, aims to provide investors with capital growth over the medium to long term by investing in a diversified portfolio of growth assets with some defensive exposure. It aims to achieve a total return after fees in excess of the trust’s composite benchmark over a rolling five-year period. The trust generally gains its exposure to a diversified portfolio of investments through a mix of managers. Its top four assets are international shares (28%), Australian shares (25%), diversified fixed income (19%) and property (9%). In second place, the Allan Gray Australia Stable Fund is a conservative option that aims to minimise the risk of loss. The fund starts with at least 50% of its portfolio in cash and money market…

• State Street Global Advisors launched the first ETFs in Australia in 2001. They included SPDR S&P/ASX 200 (ASX: STW), which now has almost $4 billion in assets. • SSGA has 16 ETFs worth $6.5 billion listed on the ASX. • Globally SSGA has 254 ETFs valued at $US715 billion ($1036 billion), including 93 in Europe, 140 in the US, two in Hong Kong and two in Singapore. • SSGA is the investment management arm of State Street Corporation, which has assets of $US2950 billion.…

GOLD WINNER VANGUARD Vanguard wins the gold award for its diversified, income-generating Australian Corporate Fixed Interest Index ETF. It has delivered slightly higher returns than government bond fund ETFs by holding 380 investment-grade bonds from 155 companies that are on average rated A+ and no lower than BBB-. The bonds are issued by Australia’s four largest banks, offshore banks, other lending institutions and property trusts. Vanguard’s fund tracks the Bloomberg Australian Bond Credit 0+ Year Index and charges an annual investment management fee of 0.26%. It suits investors who want a quarterly income from well-rated corporate bonds. Our second placegetter, the Vanguard Australian Fixed Interest Index fund, holds quality Australian bonds from the Commonwealth, state governments, government treasuries as well as investment-grade corporates. It tracks the Bloomberg Australian Bond Composite…

BEST SUPER FUND GOLD WINNER AUSTRALIAN SUPER IAN SILK CHIEF EXECUTIVE, AUSTRALIANSUPER Money’s Best Super Fund for 2020, AustralianSuper, is excited about what the next 12 months will bring for its 2.1 million members. Among several initiatives, Australia’s largest super fund will launch its new online member portal – a place where the emphasis is on making it easier for people to deal with their super. “This major upgrade will support our members digitally in setting their goals, taking any associated action and checking their progress towards their retirement outcome,” says AustralianSuper chief executive Ian Silk. “The new portal will underpin our effort to provide members with a lifetime of help and guidance.” He says every action AustralianSuper takes and every decision it makes is done with regard to the…

GOLD WINNER BENDIGO SMARTSTART SUPER This is a category where retail super funds dominate, taking out the top three places. It shows just how keen super funds are to win your business and most are working hard to lower fees where they can. SelectingSuper, Rainmaker Information’s online super comparison service, says fund fees now average around 1% and anything above 1.2% is high. The cheapest MySuper product for 2020 is Bendigo SmartStart Super, charging 0.47%. It has no admin fee, which gives the Bendigo product an edge over its nearest rival, ANZ Smart Choice (0.69%), and Virgin Super is third (0.72%). While this category looks purely at a super fund’s price point, you should also judge it on how well you trust it, whether it achieves above-average investment returns, whether…

GOLD WINNER CBUS Super members willing to pursue the highest investment returns over the long term but accepting there’ll be some bumpy years along the way are the top candidates to invest in growth products. And determining the best growth super product is just as much about how your super fund handles its good years to offset those bumpy ones. The key is to lose less of members’ money when times are tough and to be the best performer when times are good. The super product that achieves this most consistently – and wins our Best of the Best 2020 award – is the Cbus High Growth investment option. Recording double digit returns across three, five and 10 years worked in Cbus’ favour where other funds could not reach the…

GOLD WINNER REST SUPER This time last year there were about five million super accounts with a balance of $1000 or less, according to Rainmaker Information. And given the tax office is now managing and consolidating people’s inactive low-balance accounts, there’s every reason consumers should know what’s available to get their super back on track. The cheapest balanced products for $20,000 are a good starting point because they’re less likely to erode your retirement savings with high fees, provided that regular super contributions are made. Taking out this category is Rest’s Balanced Index product, which charges no investment fee and has a minimal admin fee. Rest narrowly edges out the Host-plus Indexed Balanced option, which last year won the category of Lowest-cost Balanced Super Funds ($50,000 balance). In third place…

GOLD WINNER TASPLAN Previously known as the Best Capital Stable Super Funds, this category is for super members who want a moderate level of income and some capital growth, but with a high allocation to defensive assets. Tasplan, a fund with about $10 billion in funds under management, has achieved gold winner status in 2020 for both the Best Moderate Super Products and Best Moderate Pension Products, finishing ahead of some big names on the way. The Tasmanian-based fund’s Sustainable option stays true to its capital stable/moderate label and has delivered consistent performance over three years. It’s as close to a plain super fund as you’ll get nowadays, with no investment in listed property, private equity, unlisted infrastructure or emerging market debt. It holds 27% in Australian shares, 31% in…

Challenger research tells us that in 2018, only 42% of age-eligible retirees were on the full age pension. It points this is an overall average and includes retirees in their 90s who have never had super. Its examination of data provided by the Department of Social Services shows most people (55%) who are in their first year of age eligibility for the age pension are not accessing it. And only 25% of 66-year-olds were accessing a full age pension. “This is to be compared with the 72% of all age-eligible retirees who get some form of age pension (including those receiving another DSS income support payment or a Department of Veterans’ Affairs service pension) or income support supplement,” says Challenger. It says this proportion increases with age up to 80…

A 2018 Rainmaker Information review of super funds’ extra benefits found almost all super funds now offer online account access, but just two-thirds have a mobile website or app. In 2016, only a quarter of funds had a mobile website or app, says the researcher. The review also found 70% of super funds now have a social media footprint, up from 50% in 2017. And funds use three social media platforms, on average. Facebook was the most commonly used social platform with about 80% of funds using it, followed by YouTube, LinkedIn, Twitter then Instagram. Rainmaker also says about 30% of funds have a direct share investment facility.…

Q HOW WILL AUSTRALIA’S RESIDENTIAL MARKETS SHAPE UP, AND WHAT ARE THE BEST SUBURBS AND REGIONAL CENTRES FOR INVESTORS? It has been a year of ups and downs. The first part of 2019 saw property prices fall, mainly due to uncertainty on the outcome of the federal election and the impact of the proposed changes to negative gearing and capital gains tax. However, the latter part of the year has seen price rises in all the major capital cities, except Perth. The election result was one reason for the increased confidence and price rises, but so were the Reserve Bank interest rate cuts. The next 12 months promises to be better. Price increases will continue around the country, albeit at a slower pace. Until recently, house prices doubled every seven…

GOLD WINNERS BANK G&C MUTUAL MAJOR BANK BANKWEST NON-BANK CREDIT UNION SA It’s been a busy year for low-rate cards. There are now 14 of them with ongoing purchase interest rates below 10%pa, says InfoChoice’s Jason Bryce. “The G&C Mutual Low Rate Visa card has no hidden fees to bite you,” he says. It has a low minimum credit limit of $1000, a low annual fee, no overseas ATM withdrawal fee (but the ATM could charge a fee), a cash advance rate of 15.49%pa and up to 50 days interest free. The Bankwest Breeze Mastercard has a purchase rate of 9.9%pa and a zero-interest balance transfer deal for the first six months, plus up to 55 days interest free.…

GOLD WINNERS BANK P&N BANK MAJOR BANK BANKWEST NON-BANK COMMUNITY FIRST If you pay your credit card balance in full and on time every month, you pay no interest or late fees – and this means transactor cards are for you. P&N Bank is well and truly the leader in this category. Its Simple Visa card has no annual fee, meaning you can save yourself more than $500 over two years when compared with the next cheapest option based on our judging criteria. Non-banks are clear frontrunners too, coming in slightly cheaper than banks and having some unique offers. The Community First Credit Union McGrath pink Visa card sees half your annual fee of $40 donated to the McGrath Foundation.…

GOLD WINNERS BANK ST.GEORGE NON-BANK CUA If you know you could get a better deal with your credit card – such as a lower interest rate, better rewards or fewer fees – then balance transfer credit cards are worth your while. Should you decide to switch, it’s a great idea to clear your outstanding debt before the interest-free period ends. This period can last anywhere between six and 36 months depending on what providers are prepared to offer. Also, if you’ve still got some outstanding debt at the end of the interest-free period it will be charged interest at the higher revert rate (see table). Where this category can bring consumers undone is focusing too much on the interest-free term and forgetting that payments will still have to be made…

A Deloitte Access Economics report, published in conjunction with the Australian Banking Association, shows that on average each Australian owns 0.9 credit cards; 52% of all transactions were paid for using credit or debit cards in 2016; and around one-third (35%) have active mortgages. Among the surveyed consumers, individuals who have at least one everyday transaction account hold accounts with 1.4 providers on average. Similarly, credit card customers who have at least one account hold an average of 1.5 accounts with different banks. Three of the top five most important characteristics that consumers consider in relation to credit cards relate to fees and interest rates, the report shows. Interestingly, fewer people consider interest rates to be “very important” (53%) than they do fees charged (62%). This is similar to everyday…