Ask Paul: My daughter has a learning disability, what about her super?
Q. I am big fan of Money magazine's advice regarding superannuation and "what to invest in for only $100".
I am a low-income worker and sole parent of two children with disabilities and your articles are extremely helpful.
One child is still in school. The other one is 20 years old (with a slight intellectual impairment). She has recently changed her super to Hostplus. She has no insurance plan with the new fund.
Previously her other small amount of super in another fund was eaten up by fees.
Due to her learning disability she has only been able to find on-and-off casual cleaning jobs and may only earn about $200 a week if there is work.
She finds herself unemployed again at the moment and gets a Centrelink payment.
My question is what would you recommend a very low-income-work or unemployed 20-year-old should put fortnightly into super to cover the fee and keep increasing the investment over a year?
(I think the annual fee for Hostplus is about $78). - Celia
A. This is not an easy question to answer, Celia. Superannuation is a terrific wealth-creation vehicle for millions of Australians, but where it is not great is for young people or anyone on a low wage.
Like your daughter, many thousands of young people have had a job where money goes into their fund only to be eaten up by fees and insurance charges.
Super really favours those earning over $18,200pa. That is where we first start to pay tax. The problem is that money that goes from our employer into super is taxed at 15%.
So if we earn under $18,200, we would be better off not contributing to super.
That is why our super system has rules, such as having to earn more than $450 a month before an employer makes contributions.
So if your daughter has casual work and is earning above this, super contributions will be made for her.
It was a good move to ensure she has only one fund.
You may find that Hostplus has a very-low-fee option for someone who gets super occasionally but not at other times.
A good fund such as Hostplus has historically averaged over 7% a year, so if she had $1000 in super then the earnings in the fund would compensate for the fee. (From July 1, the fee for accounts with less than $6000 will be capped at 3%.)
My advice, though, is to give the fund a call and explain your daughter's circumstances.
Hostplus will be well used to this type of situation and I am sure it has information on how to minimise fees for your daughter.