Question 1: Could you please let me have your advice on Medibank Private (MPL) now that it has lost the government army contract. It forms a major investment in my portfolio and was purchased on the float. If sell is your recommendation, what is your suggestion for a replacement? This is my only investment in the medical sector.
Answer: I am not worried about Medibank Private (MPL). In fact, I like it as an income stock now that it is finally growing its customer base. I wrote about this the other day (see https://switzersuperreport.com.au/5-great-income-stocks-from-reporting-season/ [1] )
One thing – I don’t classify Medibank as a “health” stock, nor does the market. It has none of the underlying positive drivers (demographics, ageing population, demand for services). If anything, these drivers are a negative for Medibank. The market classifies it (correctly in my opinion) as a financial stock.
Question 2: Thank you for your article about Centuria’s Investment Bonds [2]. My question is: What is the value of the Centuria 0.6% management fee when I already know I wish to invest in Vanguard’s Index fund option? I can invest via my current SMSF or Trust structure (under my family company name) for my children. Are the ‘tax advantages’ exclusive to the Centuria’s Investment Bond ?
Answer: Yes, the tax advantages are “exclusive” to the Centuria Investment Bond and bonds from other life insurance companies. Please have a look at the PDS – this should provide more clarity. https://lifegoals.centuria.com.au/pds [3]
Question 3: Can you give me your recommendation on Challenger Limited, ASX code CGF? Also, how do you rate the current share price as a buy, hold or sell?
Answer: I like Challenger (CGF) because of its leading position in annuities and strong structural tailwinds. That is why it is in our model growth portfolio. It has been doing it a bit tough and the market is down on it, due to margin pressure. According to FN Arena, of the major brokers, there is 1 buy recommendation, 5 neutral recommendations and 2 sell recommendations. The consensus target price is $7.95.
Question 4: We are in our mid-seventies and thinking of closing our SMSF. What is the cost of closing it ? Do you have any advice on choosing a super fund? CBUS has been suggested.
What is the range of fees that would be charged?
Answer: Closing an SMSF isn’t hard (or necessarily expensive), however you will have to:
- Sell all the assets (unless you can do an ‘in-specie’ transfer);
- Rollover the funds to another super fund (potentially you could also withdraw the funds); and
- Lodge a final tax return with the ATO, which will also include an audit. The ATO has some guidelines on closing an SMSF – see https://www.ato.gov.au/super/self-managed-super-funds/winding-up/ [4]
If you are looking for another fund, one of the major industry funds (such as CBUS, Aust Super or REST) is a reasonable choice. Others to throw in the mix include Q Super and Catholic Super. Make sure you select the most appropriate investment option – arguably, this is much more important than the actual fund. Fees are typically a small weekly or fortnightly fee of around $1.50 per week, plus (in pension phase) around 0.8% to 0.9% pa of your total super balance.
Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regard to your circumstances.