My super fund keeps raising its fees

I am in an allocated pension fund with NSW StatePlus. I retired in 2009, having paid into SASS for 20 years. This year I was concerned to see that the service fee has doubled from last year, having changed over the past three years thus: 2015 - $1442; 2016 - $1316; 2017 - $2687 (product services $1252.52 and advice services $1434.69). As I am paid a pension of $10,500 a year with a lower investment return, plus an increased fee, I am concerned about the result. I requested that I do not use the advice services but was told that I would not be able to remain in this plan. Can you suggest a better fund that I would be able to join or how I can reduce the high fees or better invest the capital? I have only $190,814 across a number of options. M.C.

StatePlus was originally called State Super Financial Services, set up to provide advice to members of the First State Super. The latter was originally NSW government-owned but is now a public industry fund, theoretically independent but the employer-representative directors are still appointed by the NSW government. StatePlus is still owned by FSS Trustee Corp, the trustee of the First State Super Fund, so in reality it is government controlled and one would expect a high degree of ethics.

Reading the allocated pension's brochure, (or July 1, 2017, product disclosure statement in the jargon), the advice fee is described as "nil". So there is nothing in that booklet, which is supposed to reveal all necessary information, that an advice fee is compulsorily required from members. Nor is it mentioned in its "Additional Information Booklet". In its new "Personal Retirement Plan and Allocated Pension Investment and Fee Booklet, it defines its advice fee as one that "relates directly to costs incurred by the superannuation entity because of the provision of product financial advice to a member ..."

I reached out to StatePlus for some explanation. The fund states that prior to April 2013, advice was included as a standard feature and the cost was packaged into the pricing. StatePlus now charges for advice services separately to products, and as a result can offer products with lower management fees. Clients who remain on pre-April 2013 products can transfer to the new products and pay lower management fees.

StatePlus disputes that fees have changed by the amount suggested in the last few years. They suggest that perhaps fees for a full financial year have been compared to fees for a half year as it provides detailed fee information on both the full-year and half-yearly statements.

If you have not received advice, yet have been charged for it, then appears to be an unconscionable act on the part of someone in that office to charge you for advice, in direct contradiction to the information made publicly available it could be you are in a pre-2013 fund.

An alternative is to simply rollover elsewhere. According to researcher SuperRatings, StatePlus' Balanced fund ranks 89 out of 96 similar funds over three years and has not performed as well, over the years, as its owner, First State Super's, Growth Fund (listed as a balanced fund with between 60 to 76 per cent growth assets) which ranks 23/96. Neither have performed as well as industry funds Hostplus and AustralianSuper which rank first and third respectively over three years.

By the way, StatePlus' exit fee is also shown as "nil".

I am 58 and retired, while my husband, who is also 58 and self-employed, expects to work until he is 60. We own our home, have additional shares and cash outside super of about $400,000 and are debt free. We have a self-managed super fund with ourselves as trustees, with equal accounts of about $750,000 each. The benefits mostly stem from concessional contributions made when we had business income. We also each have an industry fund account of about $330,000 each, stemming from non-concessional contributions . As I have reached preservation age and met a condition of release, I have commenced a minimum income stream from the SMSF, all of which I recontribute to the industry account as non-concessional contributions. We are looking to wind up the SMSF within about five years as we feel compliance will be too onerous as we get older. The assets are cash and listed equities, so very liquid. We would like to withdraw from the SMSF and recontribute to our industry funds as much as possible before we get too old. Our adult sons would have a considerable tax bill should they inherit our SMSF super before we have had a chance to spend it. My questions are: For myself, tax is payable on my SMSF income stream before I turn 60. Should I consider taking more than the minimum to "speed up" the recontribution strategy or is this not worth it, tax-wise? What are the lump sum rules? I saw some reference in the media that "lump sum withdrawal before age 60" rules may be under the microscope soon. Is it a good idea to withdraw a lump sum and recontribute as outlined above, up to $100k a year (or $300k roll forward)? M.L.

I agree with your recontribution strategy and point out you can contribute into super until your 65th birthday in 2024. That implies you should be able to make three lots of "three year bring forward contributions" of $300,000 each, before then, plus a little more when the non-concessional caps are indexed up, that is, every three financial years. This should cover your SMSF benefit and possibly a little of your husband's as well.

Since you are retired above age 56, all your benefits are non-preserved, and can be accessed. When a super pension is taken between ages 56 and 59, the taxable component of the pension is taxed as normal income, but carries a 15 per cent tax offset, that is, for every $100 of taxable component received within your pension payments, your tax is reduced by $15.

Now, between ages 56 and 59, a lump sum containing up to $200,000 of taxable component, (which is a lifetime limit known as the low rate cap) can be withdrawn without tax in 2017-18 as it is considered to be "taxed at a zero rate", while further withdrawals are taxed at 15 per cent plus Medicare.

This first $200,000 is thus considered taxable income (one of the more bizarre superannuation rules) so that other taxable income is pushed into the top tax bracket. It's a confusingly perfidious rule that should be abolished in the interests of greater transparency and consumer comprehension. But because it is still with us, you would do best to stop your pension for the rest of the financial year. Also, talk to your accountant to see how tax can be minimised in the overall portfolio.

Using this plus some non-super cash, you should be able to make a non-concessional contribution into your industry fund in 2017-18 of $300,000, reduced by the amount already contributed this financial year, and always assuming you have not used the "bring forward rule" in the previous two years.

I've not heard of the potential abolishment of the low rate cap although, until June 30, some people withdrew the lump sum as part of a super pension and claimed it to be tax free, a fiddle that has since been abolished.

If you have a question for George Cochrane, send it to Personal Investment, PO Box 3001, Tamarama, NSW, 2026. Help lines: Financial Ombudsman, 1800 367 287; pensions, 13 23 00.

This story My super fund keeps raising its fees first appeared on The Sydney Morning Herald.