Finance Your Budget Ask the Expert: Micro-investing apps and overseas entitlements

Ask the Expert: Micro-investing apps and overseas entitlements

Redundancy and retirement plans
Licensed financial adviser Craig Sankey answers your burning finance questions. Photo: TND
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Question: I’ve been looking into some of the ETF-like micro investing apps like Spaceship Voyager and Raiz. Are these a good option for investing small amounts, or are there traps to look out for?

Answer: Depending on how you use them, micro-investing apps can be an effective and convenient way of building an investment portfolio.

They are especially suitable for anyone looking for a cheap and easy way to start building up their investments.

There are a few players to choose from. Spaceship Voyager and Raiz are two of the biggest players, and both can be useful.

Micro-investing apps like these round up your purchases to invest your spare change.

As an example, you may purchase an item for $9.40, and then the app will round this up to $10 and invest the spare 60 cents.

You can normally set the roundup amounts, and most also offer some choice into the type of investment, which can be matched to your tolerance for risk and return.

What I like about these apps is that once they are set up, they are easy to maintain, and it almost becomes a form of forced savings.

What’s more, because the investments are such small amounts, the money is rarely missed. And there’s also no initial deposit required.

Many people who struggle to set up a conventional savings and investment plan may benefit from this type of investing.

On the downside, they have a limited investment range and flexibility and may not suit everyone.

Fees are an important consideration as they can have a large impact, especially on small investments, and this can make a substantial difference to your net returns. The most common fees include:

Subscriptions fees
These can be a set amount, such as $2.50 per month, and/or a small percentage of your account balance. The fees are different for each provider, and come in at different levels depending on the size of your account balance. For example, some of these fees only apply after you have reached a certain balance.

Brokerage fees
Some of these types of apps also charge brokerage or transaction fees.

Underlying management fees
The actual investment will also have some charges, such as the ETF management fees, which will likely be charged by the underlying ETF or index fund provided. This fee is paid indirectly and can vary.

Other fees
It’s also worthwhile to check if any other fees will be charged, such as withdrawal charges.

So, generally, yes, these are a good option for saving and investing, especially for small amounts.

However, make sure you read their Product Disclosure Statements (PDS), and compare their fees.

Once you have built up a large amount, you will then want to look at diversifying part of your investments into other areas.

Question: I am the carer of my adult daughter who is on a disability pension. We would love to live in New Zealand but wondered if we could still receive our pensions over there. We hear a lot about what aged pensioners can do but little for those on disability pensions and wondered if the same rights applied to us.

Answer: In a recent article we discussed retiring overseas and how Australia has 31 international social security agreements in place with other countries.

The good news is that Australia does have an agreement with New Zealand, and within the agreement it does cover the disability support pension. However, while it does also mention the carer payment, it is limited to partners only.

For Australia, the NZ agreement covers:

  • Age pension
  • Disability support pension (for the severely disabled)
  • Carer payment (for partners of recipients of disability support pension).

For New Zealand, the agreement covers:

  • New Zealand superannuation
  • Veterans pension
  • Supported living payment.

Note: The agreement does not cover workforce age payments such as parenting payment (single or partnered), Newstart allowance, sickness allowance or special benefit.

The agreement is very legalistic, so I would recommend you seek information and advice from the Australian government’s International Services, which can provide you with specific details regarding your entitlements and arrange your social security payments when you are overseas.

Craig Sankey is a licensed financial adviser and head of Technical Services & Advice Enablement at Industry Fund Services

Disclaimer: The responses provided are general in nature, and while they are prompted by the questions asked, they have been prepared without taking into consideration all your objectives, financial situation or needs.

Before relying on any of the information, please ensure that you consider the appropriateness of the information for your objectives, financial situation or needs. To the extent that it is permitted by law, no responsibility for errors or omissions is accepted by IFS and its representatives.  

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