An Allocated Pension is an old term now. It was an investment that let you rollover your superannuation money into an account held in your name in a super fund. Any returns you make on your investments are added to your account. The fund then paid you regular income payments in the form of a pension.

This type of pension has now been replaced by an Account Based Pension

What is an Account Based Pension?

The Account-Based Pension Plan is the replacement for the Allocated Pension and offers an effective way of receiving your superannuation entitlements as an income stream instead of one lump sum. It is a simple, flexible and convenient way for you to convert your accumulated superannuation into a tax-effective income. The Account-Based Pension Plan allows you to control your retirement income by simply pre-selecting how often and how much you wish to receive as a pension.

What is a Master Trust/Investment Platform?

Investment platforms allow you to hold and manage a portfolio of investments.

The two most common types of investment platforms are Master Funds and Wrap Accounts. A Master Fund is an investment tool where a trustee or responsible entity holds your investments on your behalf. Using a master fund you can invest in a number of underlying investments (usually wholesale managed funds) and access a selection of fund managers.

What is a Wrap Account?

A wrap account is a service that lets you set up a portfolio of investments. While the service helps you hold your investments, your investments are held in your own name. From a wrap service you receive regular reports on the investments held within the portfolio.

Before you decide to manage your investments in a platform, look closely at the management and transaction fees and make sure that using an investment platform will suit your investment needs.

What is a Superannuation Fund?

The fund (sometimes called a "scheme" or "plan") is usually a trust fund. The trustee collects the superannuation contributions, invests them, and manages the distribution of the money.

All superannuation funds are supervised by the Australian Prudential Regulation Authority, which ensures they meet specific ongoing criteria which are designed to protect the interests of fund members. Funds must provide the Authority with information about their management and financial situation each year. The Australian Tax Office deals with various small funds..

What Does Fund Manager Mean?
The person(s) resposible for implementing a fund's investing strategy and managing its portfolio trading activities. A fund can be managed by one person, by two people as co-managers and by a team of three or more people. Fund managers are paid a fee for their work, which is a percentage of the fund's average assets under management.

Also known as an "investment manager". .

What Does Management Fee Mean?
The management fee is the cost of having your assets professionally managed. A charge levied by an investment manager for managing an investment fund. The fee pays other people to select which securities your money (along with that of the other investors in the fund) is invested into, to do all the paperwork needed and to provide information about the fund's holdings and performance.

Management fee structures vary from fund to fund, but they are typically based on a percentage of assets under management. For example, a mutual fund's management fee could be stated as 0.5% of assets under management.

What does a Underlying Management Fee mean
The underlying management fee is the same as above but it is usually expressed as the underlying management fee when it is in an Investment Platform or Wrap Service.

What is a Managed Fund?

A managed fund pools your money with money from other investors to form an investment fund. Specialist investment managers then invest the money in the fund on your behalf.

Managed funds come in many shapes and sizes. Some funds
invest in just one type of investment such as Australian shares,
international shares, cash or mortgages, while others known as diversified funds invest across a range of asset classes including Australian shares, international shares, fixed interest, property securities and cash. So whether you have a small amount of money to invest or a large amount, your money has access to the investment buying power of millions of dollars. This buying power means you can take advantage of opportunities normally only available to large corporations or those with extensive specialist knowledge..

What is an Expense Ratio?

A measure of what it costs an investment company to operate a mutual fund. An expense ratio is determined through an annual calculation, where a fund's operating expenses are divided by the average dollar value of its assets under management. Operating expenses are taken out of a fund's assets and lower the return to a fund's investors.
Also known as "management expense ratio" (MER).

.What Does Exit Fee OR Back-End Load Mean?
A fee (sales charge or load) that investors pay when selling mutual fund shares within a specified number of years, which usually ranges between five to ten years. The fee amounts to a percentage of the value of the share being sold. The fee percentage is highest in the first year and decreases yearly until the specified holding period ends, at which time it drops to zero.

Also known as a " deferred entry fee charge or load." .

What Does Hedge Fund Mean?
An aggressively managed portfolio of investments that uses advanced investment strategies such as leveraged, long, short and derivative positions in both domestic and international markets with the goal of generating high returns (either in an absolute sense or over a specified market benchmark). .

What Does Leverage Mean?
1. The use of various financial instruments or borrowed capital, such as margin, to increase the potential return of an investment.

2. The amount of debt used to finance a firm's assets. A firm with significantly more debt than equity is considered to be highly leveraged.

Leverage is most commonly used in real estate transactions through the use of mortgages to purchase a home.

What does Salary Sacrifice mean?

Salary sacrifice, generally, is an arrangement with your employer, where you agree to receive part of your gross salary as a benefit rather than as salary. The value of this benefit is paid from your gross salary. This benefit is usuall paid into your superannuation and your salary is reduced by the cost of the benefit before Pay-As-You-Go (PAYG) tax is calculated.

What is a Discount Broker Service?

When you invest through a Financial Planner or Broker the fund manager pays the broker an Entry Fee and will also pay what is called a Trail Commission. The commission is retained by the Financial Planner or Broker for lodging the business on your behalf and presumably for giving you financial advice. A Discount Broker or Financial Planning Company such as the site that you are on at the moment will waive the entry fee entitlement and pay you back all or part of the trail commission. Some companies take part of the trail commission as a fee which is needed to run the service and some charge a flat fee or mixture of both. The fee that is charged by these discount houses is used to maintain the service and to fund the cost of the Australian Financial Services Licence which is by law required to operate this kind of business.

Using these kinds of services can greatly reduce your investment costs and if you need advice you can simply use a pure "Fee for Service" Financial Planner.

CONTACT DETAILS:

Financial Planning & Investment Group:

Phone: 9497 2008

Fax: 9696 7259

Mail: Suite 21, Level 5, 150 Albert Road,
South Melbourne, Victoria 3205

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