Superannuation???

[walker]

Does anyone on here know much about how super works?

My wife is in the HESTA scheme and she recently got a statement which shows that she had negative interest in the last 6 month. They actually took over $2k from her super account!!!

They are a big scheme and I am sure it is all legal but it just doesn't seem right. She rang up to questio it and was told that her super had an interest rate of -3.5% and so they deduct money. She only works part time so I think she only had about $700 in payments but the overall balance fell by $2.5k.

[p38arover]

I had better check my wife's Hesta account

[langy]

Go and download the 2007 report:

Annual Report (2007) (http://www.hesta.com.au/Join-HESTA/Tools-and-Forms/Publications/Annual-Report-2007.html)

and have a look at the 2003 results in both areas. You'll notice that there are negatives all over the place.

Used to be that super was simple: You put money in, and on retirement, you get it and the interest back - well now you get options as to what you want to invest in - each super fund has different areas you put some or all of your super into: shares, property and other managed funds. Each section behaves differently - for example shares tend to rise quicker than property, but property is harder to loose money on ( Something like the tortoise and the hare ?)

So as long as it is only a small negative percentage of the total for the 6mths period, and nothing to do with the stated value of contributions your Missus put in ( Not the overall value) , then it is akin to smoke from a 300TDi - it happens- although if it continues then something is wrong.

Your missus can change super funds easy and without penalty ( I think), if this negative interest continues. Read up on other super fund sites as to their 2007 reports, and see how they are doing.

[Slunnie]

I thought super fluctuated with the stock market or whatever it is that the fund has invested in.

[langy]

Yep - could have been that HESTA invested money in an insurance company, and then along came a cyclone.

[walker]

Thanks Langy,
yes I guessed that it was due to whatever invetments they had the money in. It just seemed a large amount to loose. She only had $30k in the account and lost $2k in only 6 months.

The reason she found out was because she was rolling it over into another super scheme with her new employer.
And you are correct, there are no penalties for changing schemes.

[Lotz-A-Landies]

Wot Langy said.

You will find that your wife has a balance which shows the number of "Units" in the fund that number should be an increase over the previous period.

As Langy suggests the value of those "units" may fluctuate with market trends and it is possibly that Hesta invested heavily in the Sub-Prime market sector in the US. There were some good "gains" but that sector had to come adrift when you realise that some of the loans were 100% of the value of the property to people who didn't have an income. (There is something to be said for a regulated mortgage market).

What you should investigate is the "Strategy" your wifes account is in. If it is in something like High-Growth then her money is invested in the risky end of the market. There is potential for good gains but also a great potential for big losses.

If you are not a gambler you may want to investigate a strategy like "Balanced" where the investment is spread over a range of risk categories, still the chance to earn when the market is buoyant but at a lower more predictable and hopefully less losses.

I am not a financial adviser so this is only information you can consider when you do talk to a financial adviser.

Cheers
Diana

[dobbo]

Just talking to one of the guys from work today, his dropped by 20k.





He was not pleasant to work with today

[Lotz-A-Landies]

Just talking to one of the guys from work today, his dropped by 20k.

He was not pleasant to work with today

Next year it may bounce by $30K. In the long term it only matters on the day you cash it out!

Diana

[Barra1]

There is a great deal of myths and confusion surrounding superannuation. Firstly, before taking any action, such as switching funds etc,. take a step away from any hysteria or general advice.

As mentioned previously, different investments options will produce different results.

High Growth, Growth, Shares etc (I do wish the various funds could decide on common titles for their investment options), however, these options with high exposure to shares and property (I'm sorry but property can fall as quickly as shares - Listed Property Trusts) will have significant fluctuations over time.

The greater the return the greater the risk.

Whilst we all enjoy the big returns (and some funds have had returns of in excess of 25% pa recently) we do not like the negative years.

And when the markets fall, it is possibly not the time to be moving your funds.

Chasing last year's "Hero" (or top performing fund) is fraught with danger. History has proven it is too late and last year's hero often ends up being this year's flop.

You are looking for consistency over the long term. And there lies your answer.

Consider your time frame, discuss your individual needs with a CFP in regard to risk and return and ensure you monitor your fund regularly.

Just in passing, Hesta is what is known as an Industry Fund - it is generally accepted an Industry Fund has lower fees, good administration and HESTA has competitive performance.

In your case, the sharemarket has suffered in recent times which is reflected in the negative returns - the fees taken have always been there but just not as obvious as now.

Negative returns seem to make everyone look more closely at their funds.

Specific advice? Get on the phone, look for a Certified Financial Planner who is fee-based, ask him if he/she can provide independent advice on the industry funds - and make sure he/she is a member of the Financial Planning Association (if not, hang-up). Book an appointment - and you interview the Planner - ask him/her all the questions about how they work, what their expectations are regarding their clients, how long they have been in business, their business structure (whether they are expected to sell one investment companys products etc) - and if you think they sell - get up and walk out.

Make sure you have someone with you - and after the interview, have a cup of coffee and discuss the Planner - your gut feeling, whether you thought he/she was genuine etc. Get a planner who you like - and just as importantly - a planner who you think likes you. You will probably only need to interview 2 or three. There should not be any charge for the first interview - if there is, you got it right, walk away.

No doubt every man and his dog has a horror story about someone they knew who got ripped off etc. We all have a story.

You get one crack at retirement - don't mess it up.

[101RRS]

A minus interest rate of 3.5% in 6 months - I have lost about 10% in the last 6 months - maybe I should have had my money in Hesta.

-3.5% over the past few months is good - it will pick back up.

Garry

[Utemad]

Just talking to one of the guys from work today, his dropped by 20k.

Was talking to some retired folk a few weeks ago and theirs had dropped by $70k but can't remember the timeframe.

As he said though, it's only realised if you sell.

[waynep]

I would doubt that an organisation like HESTA would want to ruin their reputation by bein seen to be ripping anyone off.

As said before it is likely that your super is invested in an option that has a mix of shares and cash ( if you haven't elected a particular mix yourself it generally goes into this "balanced" fund. )

The sharemarket has fallen considerably since start of the year, so that will probably be the reason for the negative amount. However if you look over the past 3 years you'll probably find you have had reasonable growth.

You will have the option of "switching" into a lower risk mix that has a higher fixed interest component. However you will then miss out on making up your losses if the sharemarket rebounds. There'll also be a small cost of switching.

It's a matter of taking an active interest in where your super fund is investing YOUR money on your behalf. Unfortunately now the days of defined benefits are gone for most if us, its something we all need to do.

[Lotz-A-Landies]

A minus interest rate of 3.5% in 6 months - I have lost about 10% in the last 6 months - maybe I should have had my money in Hesta.

-3.5% over the past few months is good - it will pick back up.

Garry
Hi Garry

I just looked at my account today and my strategy lost 3.3% it could have been worse the "High Growth" strategy lost 5.8% and the "International equity" lost 12% and even property lost 6.9%.

The result is that after 12 months and adding over $18,000 in contributions (personal and employer) the estimated value is $200 more than it was this time last year, in fact most of the losses seem to have arrived in the 2008 calendar year. :(:(:(:( Having gone backwards $11,200.00 since 31 December. :(:(

Oh well, lets hope it picks up?

Diana

[cartm58]

Superannuation invest your funds in Property Trusts, Stockmarket both local and overseas, Government bonds and debentures, cash at bank, and so on, over the last ten years most industry funds been riding the market upwards and posting interest rate returns on your funds over 15% per annum, you wife loss is refelctive of the recent stock market correction caused by the USA sub prime mortage crisis.

they say you can expect a negative return on investment once in 7 years

In the long run your wife "losses" will be recovered by future growth in the markets.

It is a loss if she cashes out her superannuation now, same as if you sold your shares today at lower prices than what they were worth 6 months ago.

The old superannuation system of being guarannted 5 or 6 times your final year of salary have long gone as being uneconmically sustainable by anyone Govts included and now your superannuation on retirement is what you have saved what your employer has contribtuted each eyar currently 9% of salary and whatever the fund has earnt on your combined contributions less charges and losses.

With taxation at 15 cents per dollar contributed on voluntary superannuation its still one of the best investments you can decide to make tax wise even with current stock market devaluations.

[101RRS]

Hi Garry

I just looked at my account today and my strategy lost 3.3% it could have been worse the "High Growth" strategy lost 5.8% and the "International equity" lost 12% and even property lost 6.9%.

The result is that after 12 months and adding over $18,000 in contributions (personal and employer) the estimated value is $200 more than it was this time last year, in fact most of the losses seem to have arrived in the 2008 calendar year. :(:(:(:( Having gone backwards $11,200.00 since 31 December. :(:(Oh well, lets hope it picks up?

Diana

Yep :mad:- and another yep :mad:- Dec/Jan were where the losses happened in a big way - Feb is already picking up though so the FY is likely to end in +ive territory.

Garry

[JamesH]

Thanks Langy,
yes I guessed that it was due to whatever invetments they had the money in. It just seemed a large amount to loose. She only had $30k in the account and lost $2k in only 6 months.

The reason she found out was because she was rolling it over into another super scheme with her new employer.
And you are correct, there are no penalties for changing schemes.

Welcome to the stock market. Now when you see reports of the market collapsing you can know for whom the bell tolls, it tolls for thee. Good news is up until this year you were getting fantastic growth. I dread my next statement though, I would have lost the price of a new Defender since Christmas.

But remember you don't see any of it until your retire. There will be at least two more booms and busts before i see any of it so no point in whingeing now, even though I am.:(

[Tango51]

You are never going to find anyone more motivated than you to make sure your money works for you, so do all you can to find out how it all works.
Although it will be peanuts to many, I have shoveled in all I could get my hands on in this downturn, actually since November.
The agency doing the paperwork thought I was crazy, but as others have said it only counts when you sell/withdraw and the buying is cheap now, it will get cheaper but it also will go up.
Retail slumped in Jan feb, so a slowdown is signaled.

[LandyAndy]

We got 17% in our Shire(WALGOV) super on the last report.
The reps BRAG at our bi annual meetings its the best Super return in the country.
Andrew