Superannuation rule changes add to lure of SMSF route

The Australian, April 4, 2017:

More than two million Australians are expected to have self-managed super funds within the next 15 years, with this year’s superannuation changes encouraging more people to set up their own funds, the chief executive of the Self Managed Superannuation Fund Association, Andrea Slattery, said yesterday.

Ms Slattery said the superannuation tax changes, which come into force on July 1, would be another factor in the growth of self-managed funds.

“The number of self-managed super funds has doubled from 230,000 in 2003 to more than 580,000 today while the number of trustees has risen from about 580,000 to 1.1 million today,” Ms Slattery said. “Both are expected to double over the next 15 years,” she told The Australian yesterday after the release of a report on self-managed super funds by the SMSF Association and the Commonwealth Bank.

The $654 billion self-managed super funds market make up the biggest single slice of the $2.2 trillion super fund industry in Australia. It is larger than the $570bn in retail super funds and the $500bn in industry super funds.

Ms Slattery said self-managed super funds made it easier for ­people to manage their retirement planning and also the transition from the accumulation phase to the retirement phase.

She said they were also well placed to help people best position themselves for the change in the rules around superannuation, which will set a maximum of $1.6 million on the amount that can be put into superannuation with tax-free earnings and cut ­allowable annual contributions.

The new rules will encourage some people with higher balances to make extra contributions to the super account of their spouse.

Ms Slattery said the super changes provided an opportunity for people to work through their retirement planning on a family basis, which could be done more efficiently for some people through a self-managed fund.

She said the big increase in the number of small businesses in Australia in recent years as well as the number of people who were now self employed was also providing a market for more people to look at setting up their own SMSFs. “There are only 1.1 million trustees in the SMSF market but there are 2.5 million small businesses in Australia. There is also an increasing number of people who are self employed who are also looking at SMSFs as well as professionals,” she said.

“There are many people in the market who are looking at SMSFs as they become more involved in their financial circumstances.”

Releasing the report, Commonwealth Bank’s head of SMSF Customers, Marcus Evans, said it showed there was a new generation of younger Australians setting up self-managed super funds.

“We are moving away from the stereotype of the SMSF being set up by crusty older males who are former businessmen,” he said.

He added that the report showed about 35 per cent of self-managed super funds were being set up by younger people, including more women, who were prepared to pay for advice to help them with their fund.

The report showed that the more traditional SMSF owner, which made up about 30 per cent of those surveyed, was a male over 54 who had set up the fund more than 10 years ago. Of all the groups surveyed, they were most likely to be business owners or former business owners. But while these still represent the biggest sector of the SMSF market by amount of money in their super funds, they were a declining percentage of the total number SMSFs, with a new generation of members coming through.

“We are seeing a shift from the traditional, male-dominated categories who have held their SMSFs for longer periods and are typically older,” Mr Evans said. “An increasing proportion are younger women who are seeking greater advice about their superannuation but they are prepared to pay for it.”

Mr Evans said there had been a last-minute rush of people seeking advice on how to place themselves ahead of the advent of the new superannuation rules that come into force on July 1.

But he said there were not enough qualified advisers with the time to handle the questions over the next few months.