SMSFs Remains a Popular Choice

A survey released this week shows that the popularity of self-managed super funds remains high. This is shown not only by the number of funds being established each month but also by the increasing value held in these funds and the growing number of members.

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The report commissioned by the SMSF​ Association said that there was an increase in trustee confidence strongly linked to how well trustees of SMSFs are tracking towards meeting their retirement objectives. Nearly seven out of every 10 trustees are reasonably confident in achieving their goals.

This report is also consistent with findings by the Australian Taxation Office. ATO statistics show more younger Australians are looking at SMSFs with greater interest, with more than 42 per cent of all establishments for the December quarter being for people under the age of 44.

ATO statistics show close to two thirds of advisers have noticed a growing demand for SMSF services from 31-to-40-year-olds, and more than one in five have also experienced an increase in demand from 20-to-30-year-olds.

With SMSFs growing not only in number but also in value, the report confirms there is a shift to move away from those opting to try to “do-it-yourself” to trustees seeking out advisers who will help manage their fund. Three in five are turning to advisers for support in managing their SMSF.

The report also reveals that trustees are becoming less personally involved across all tasks related to their SMSF.

While trustees are still having input into the allocation of their investments, they are increasingly relying on advisers to help with these strategies.

New figures show that 75 per cent of SMSF trustees are less likely to be personally involved in monitoring their SMSF’s performance and account balance, with most SMSF trustees also not personally involved in compliance and daily administration tasks.

While turning to a professional for advice may provide SMSF trustees with the comfort that their retirement funds are under expert care, research also suggested that trustees need to understand their obligations. Three in 10 trustees said their level of understanding could be better.

With future changes to superannuation likely to focus on preservation age – the age you can access your super – 42 per cent of pre-retiree trustees said they would continue working until age 70 if the preservation age was raised, with more than half considering a Transition to Retirement (TTR) pension to help support their living requirements.

While benefit payments from SMSFs have risen by 59 per cent over the past six years, payments taken as a TTR pension or regular income stream have almost doubled. With longer life expectancies, low interest rates and changes to Centrelink thresholds looming, policies are still needed to help overcome the risk of longevity of retirement funds, which is likely to be the biggest risk to older Australians.

With more than one million Australians having turned to taking control of their own super, the growth of the SMSF sector is likely to continue to grow, with advisers playing a vital role to ensure they are working with trustees on strategic, value-added advice and investment strategies that balance their risk and return objectives while minimising longevity risk and allowing them to live the retirement lifestyle they have saved for.

Originally published as
SMSFs are the fastest growing superannuation sector in Australia by Olivia Maragna in The Sydney Morning Herald 31 July 2015