Kuta Beach

Kuta Beach

Saturday, 26 April 2008

Is Sunsuper The Cheapest Super Fund?

Right now I am with Hesta. They claim to have low fees but at the moment I pay administration fees of $1.25 per week and management fees of about 0.4 per cent. However, I could probably do better. If you invest in the Australian index fund provided by State Street Global Advisers at Sunsuper you pay management fees of only 0.15 per cent. The administration fee for Sunsuper is slightly higher at $1.30 per week, but that is negligible compared to the difference in management fees. If you have large amounts of money invested, the difference in costs can be massive.

I think putting money into your super fund is one of the best investments. My plan is to first have enough money outside of super to sustain my life forever in the event of job loss and family abandonment. I'll need approximately $150,000 for this, and I plan to save it up in a mutual fund outside of super. Once I have this emergency fund I will focus on building wealth within super because it is more effective. I can salary sacrifice to my super fund to the point where my taxable income is below $6,000 per year, and then I will pay no tax. Furthermore, because I will be classified as a low-income individual then I am eligible for the Australian Government's super co-contribution, which means that if I inject $1000 into my super fund, the Government will pump in another $1,500. This means I maximize my net worth given my income.

Because virtually all the fruits of my labor is locked away in my super fund, this plan is also great because it forces frugality by making me depending on the dividends of my emergency fund.

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