Question 1: Hostplus recently launched a Self-Managed Invest (SMI) product that gives SMSF investors access to investments previously available to members only. This provides benefits of investing with one of Australia’s top superannuation providers, while maintaining control of your SMSF. Are there any particular advantages to this (new) approach versus simply investing directly into an ETF for example?

Answer: Yes, it is an interesting offer. The two main advantages are that you get access to professional managers and potentially asset classes that can be difficult to access (for example, infrastructure), and secondly, it stacks on some options in regard to pricing. Fees are:

1. A one-off joining fee $240;
2. An annual admin charge of $165 pa.
3. Management fees, from as low as 0.02% pa for the ‘indexed balanced’ option to 0.71% pa for the ‘balanced option’ (the former is attractive, the latter isn’t);
4. Indirect costs that you don’t directly see, ranging from 0.05% pa for ‘indexed balanced’ to 0.35% for ‘balanced’ and 0.39% pa for ‘property’.

If you are an index, passive style investor, it is about line ball with investing directly in the major ETFs (although it might be considerably more difficult to create a “balanced” portfolio using ETFs).

Question 2: My question is regarding the “Death Tax” for the balance of your super once the husband and wife die and the money is left to non-dependants. I understand how it works apart from the re-contribution strategy. I was of the understanding that once you start drawing from your pension (including lump sum), you can’t put it back in. Can you re-contribute the concessional money back in to make it tax free ?

Answer: If you are eligible to make a contribution (under 65, or if between 65 and 74 and meeting the work test), you can potentially re-contribute monies into super. Two points to note:

1. Technically, it will go back first into an accumulation account, from where you can then commence a new pension.
2. Any contribution will be subject to the caps ($100,000 non-concessional limit), which you can only access if your total superannuation balance is less than $1,600,00.

When you re-contribute these monies, you will change the balance (ratio) between the ‘tax free’ component and the ‘taxable’ component.

Question 3:  I remember you and Charlie Aitken gave CYBG (CYB) a thumbs up as a stock worth looking at. It is now below $3. Should one consider buying CYB?

Answer: I don’t think I have ever recommended CYB. I am an accidental, small holder (courtesy of the NAB demerger) and viewed it as an option play on UK banking, albeit very much a tier 2 or tier 3. But you’re right, Charlie did give it the thumbs up.

I have no view on CYB and can’t really see why anyone would really want to play UK banking via a tier 2 or tier 3 operator. That all said, here is what the analysts say: according to FN Arena, the consensus target price is $3.63, about 30% higher than the current market price. Of the three major brokers that follow the stock, there are 2 buy recommendations and 1 sell recommendation.

Question 4: What are your thoughts on Mortgage Choice? I have some of these purchased over last 2 to 3 years.

Answer: Mortgage Choice (MOC) is a challenging company to get a handle on, given the ups and downs of the property and home lending markets post The Royal Commission. They have quite an impressive CEO but just how well they are travelling at the moment – I really don’t know. Unfortunately, none of the major broking firms cover the stock. I note that today, CBA re-affirmed its intention to sell its 16% holding in Mortgage Choice. Again, hard to say whether a sale by the CBA would be a positive or negative for the stock.