You can invest ethically for retirement in three places: inside your super fund, by choosing an ethical or sustainable option if it has one; inside a self-managed super fund, where the trustees choose the investments; and outside super, in your own name.
inaam is the third kind, and an SMSF can also invest in it. It is a managed fund and it sits outside super. The fund is ASIC registered, ARSN 691 614 132, the subscription is $10 a month and the minimum to invest in the fund is $100.
People who start looking for an ethical retirement usually begin with one question: what is my super invested in? It is the right place to begin, because super is where the compulsory money goes. It is also only part of the picture. Moneysmart puts it this way on its page about getting your super: your super is only one part of your retirement income, and personal savings, investments and other assets can all play a role.
the three places retirement money sits
The three differ in who chooses the investments and in when you can reach the money.
| who chooses the investments | when you can reach the money | |
|---|---|---|
| your super fund | You pick an investment option from the fund’s list. If you make no choice, the fund puts your money into its MySuper product. | From age 60 if you are retired or leave a job, and from age 65 whether or not you are still working. |
| a self-managed super fund | The members are the trustees, and the trustees decide where and how the money is invested, within super law. | It is still super, so the same rules on access apply. |
| outside super | You do, in your own name, or through a company or trust you control. | When the investment’s own terms allow. It is not preserved until retirement. |
The ages come from Moneysmart, which also notes that there are some circumstances where you can access super earlier.
making your super ethical
Moneysmart’s page on ESG investing says it may be offered by investment funds, including through superannuation. Its guide to choosing a super fund says most super funds offer a range of investment options, and that most people can choose the fund that receives their super payments. So there are two levers: the option inside your fund, and the fund itself.
- Look at the options your fund offers. Log in or read its investment guide, and look for an option described as ethical, sustainable, responsible or ESG.
- Read what that option screens. Its PDS says what it leaves out, what it looks for, and what it costs. None of those labels is defined in law, so two options with the same name can hold different things.
- Compare it the way you would compare any option. Moneysmart lists five features to weigh: investment options, investment performance, fees and costs, insurance and services. It suggests looking at performance over five years or longer, and comparing similar options with each other.
- If nothing in your fund fits, look at other funds. Weigh the same five features before you move, insurance included.
Choosing an ethical option does not change the rules of super. The money is still preserved, and the fund still charges fees.
if you run your own super fund
A self-managed super fundA super fund privately operated by its members, who are also its trustees. Often shortened to SMSF. is the version of super where you choose every investment. Moneysmart is direct about what that involves: the trustees are responsible for running the fund and for keeping it compliant, it takes time, effort and skill, and complaints about an SMSF cannot be taken to the Australian Financial Complaints Authority.
The ATO says an SMSF’s investments must be permitted by the fund’s trust deed and by super law, be made on an arm’s length basis, and meet the sole purpose test: the fund exists to provide retirement benefits to its members. Super law also requires an investment strategy, which the ATO says should be in writing and should consider, among other things:
- risk and the likely return from the fund’s investments;
- the composition and diversity of those investments, and the risks of inadequate diversification;
- how easily the assets can be turned into cash to pay expenses and member benefits.
An ethical or impact investment can sit inside that frame. Whether a particular one belongs in a particular SMSF is the trustees’ decision. inaam accepts applications from SMSFs and family trusts. Its fund is a concentrated one, which is exactly what the ATO’s point about diversification asks trustees to weigh. Core and satellite investing covers that in more detail.
investing outside super
Money you invest in your own name is not preserved. You can ask for it back under the investment’s own terms, at any age. That access is what money outside super offers and super does not.
The trade is tax. Moneysmart’s summary puts the tax on investment earnings at 15% while money stays in super, and at your marginal income tax rate on money you take out of super and invest elsewhere. So the two do different jobs. Super is built for retirement and has its own tax settings. Money outside super is easier to reach and is taxed like the rest of your income.
two decisions
an ethical choice in both places
Picking an ethical option inside super and investing ethically outside it are separate decisions. One does not rule out the other, and each has its own documents to read.
if you are retired, or close to it
If you are drawing on your savings, or soon will be, read this part before the rest. The inaam fund does not pay an income. Its PDS says distributions are reinvested and that there are no cash distributions. Its target market determination says the fund is not suitable for investors requiring regular income, capital preservation or ready access to capital.
The same document says the fund has been designed for people who are investing no more than 10% of their capital, not counting their home, and who can wait between three and seven years. Those lines are the issuer’s description of who the fund is for. They are worth reading at any age, and most of all when the money has a job to do soon.
how to check an ethical option
The checks are the same wherever the money sits. Read what the option holds and what it excludes, whether each exclusion is absolute or a revenue threshold, how a company gets in, and what it costs. Ethical investing in Australia sets out eight checks in order.
certification
one independent check
The Responsible Investment Association Australasia runs a certification program for responsible investment products. Certification is voluntary, so an option without the symbol can still be doing the work. Its own documents are where you check.
where inaam sits
how we do it
outside super, with the list published
inaam is a managed fund you invest in through an app. It picks companies against three published pillars across five impact themes that members customise, and every company it holds is named in the app.
The subscription is $10 a month, which is $120 a year whatever your balance, and it is separate from the money you invest. The minimum to invest in the fund is $100. A buy-sell spread of 0.1% applies when you enter or exit the fund. Sign-up happens in the app, and SMSFs and family trusts are welcome.
The method is on how it works, the licence details are on trust and licensing, and the PDS and TMD are linked at the foot of every page.
what to take away
Start with your super, because that is where the compulsory money is. Find out which option you are in, whether your fund has an ethical one, and what that one holds.
Then decide whether you also want money invested outside super, where you can reach it and where you choose every holding. If you do, read the documents of whatever you pick, ours included, and check who the fund says it was designed for.
