Self Managed Superannuation Funds and the Ethical Investor
By: John Arthur Thomas
Submitted: 2011-03-30 03:08:18 | Word Count: 1065
Wanting to invest your superannuation your way? Not interested in the standard investment sectors. Love to have your retirement assets reflect your values and provide a "feel good factor"? The good news is that you can grow your retirement funds in a more meaningful way in areas that interest you.
Superannuation does not need to be invested with big multinational fund management companies or in industry super funds with standard choice offers. Investing in a Self Managed Superannuation Fund with specialist advice by an ethical investment adviser, can create a financially rewarding and socially/environmentally positive retirement base.
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Firstly a Self Managed Superannuation Fund requires a reasonable account balance to justify the establishment costs and trustee obligations. Generally a minimum of $200,000 with regular contributions would be needed.
So what can are the choices?
Ethical property investment options
A self managed superannuation fund is the only superannuation vehicle that can purchase properties directly for your purposes and interests.
Purchasing environmentally positive homes provides a tangible investment choice with environmental benefits. The annual rental income and growth adds value to your superannuation fund value.
In addition, there are social housing choices, such as the purchase of apartments or houses under the National Rental Affordability Scheme, that are rented below commercial rates to lower income earners with a government annual $9,140pa incentive payment over 10 years..
Investment can be made directly into commercial property tenanted by not for profit organizations or indirectly into this sector via mortgage trusts that provide loans secured against property with partial government security.
For example there is a mortgage trust that includes a Brisbane based women's refuge where they are paying off the mortgage of the building, with high property equity, at commercial rates. This allows the refuge to have security of ownership rather than uncertain tenancy and eventually save ongoing resources once the loan is paid.
You can buy unit in traded Real Estate Investment Trusts that trade on the Australian Stock Exchange, which gives you a holding in larger commercial properties. Some of these property trusts have very high environmental covenants on their buildings and tenants and an ethical investment adviser can assist you in seeking out the more environmentally positive property trusts.
Ethical Investment share choices?
Having a self managed superannuation fund means that an investor can buy shares that they personally have an interest in and support businesses that reflect their ethical concerns and values.
The standard superannuation investor will have the share component of their superannuation fund invested predominately in the largest 50 Australian share companies in a similar ratio to the size of those companies. Therefore companies such as BHP, Santos, Woodside Petroleum and Rio Tinto with significant Coal, Petroleum and Uranium interests, would all be predominant shareholdings, in a standard superannuation fund.
There are many international and Australian companies that display very positive corporate citizenship. These are companies that look after the community, their staff and the environment.
For the individual investor, it can be difficult to find out about these businesses in the sea of "greenwash". Louise Edkins of Ethical Investment Advisers Pty Ltd, a Brisbane based financial planning specialist, sources information from a range of research experts "we not only receive financial analysis but also social, environmental and governance research on companies"
"In the past, we have found that companies with good ethics tend to have strong consumer loyalty and staff retention." Louise adds, "Companies that look beyond the financial bottom line are forward thinking businesses that are reducing their financial risks by assessing the environmental and social costs of their businesses".
Other Investment choices for the ethical investor
There are bonds that provide capital risk management and security at a reasonable income return. These can be issued by companies with positive ethics including some banks as well as governments.
Karen McLeod of Ethical Investment Advisers Pty Ltd, a Bulimba based ethical investment specialist adds, "Hybrid fixed interest/shares opportunities can provide attractive after tax income with growth prospects within companies that suit an investors risk and ethics profile".
Pensions
SMSF's can be easily converted into pensions and in the right circumstances can be paying tax free income streams. SMSF's are very flexible and there are several types of pensions that can be set up. These include Transition to Retirement (TTR) Pensions, where you are able to take a pension prior to retirement.
Employer Contributions
In most circumstances SMSF's are able to take employer contributions and you can roll over most other supers into an SMSF.
Trustee Responsibility
Having a SMSF has its downside, as Trustees you would be responsible for the investments and ensuring that the super is run according to the various rules and regulations set out by the Australian Tax Office (ATO).
However you can enlist the services of your adviser or accountant to assist with the set up of the fund and the day to day running of the super.
Why should I have a Self Managed Super?
You should consider a self managed super if:
You want a more 'hands on' approach.
You want control over the assets that are bought and sold.
You want to be selective about the investments you will have in your super fund.
You are not happy with the ethics and/or performance of your current superannuation fund.
You want to buy an asset like a residential property that cannot be bought through a standard super fund.
Costs
There can be up-front costs of setting up the SMSF, including the establishment of the Trust Deed and registering for an ABN with the ATO. Although some public offer supers also charge an up-front cost based on buy/sell unit prices.
The cost of running a self managed superannuation is generally around the same cost as a public offer fund, but slightly more than an industry fund with an ethical overlay. Ask your adviser for details of costs.
The Smart Investment Choice
"The beauty of a self managed superannuation fund is that you can invest your retirement savings your way and an ethical investment specialist can ensure that your risk and values are reflected within the choices recommended" "You know where you money is invested and what its doing" "A standard superannuation fund product is quite intangible and the underlying investments an unknown to most investors" "ethical investment within a self managed superannuation fund is quite empowering for our clients as well as financial rewarding"
Author Resource:-
Ethical Investment Advisers Pty Ltd is a well established Brisbane based financial planning specialist with 3 local offices.
http://www.ethicalinvestment.com.au
