Being able to control how super is invested is a big selling point for self-managed super funds. At least close to one million Australians think so given there’s more than half a million SMSFs looking after retirement nest eggs. So why are SMSFs so popular?
Self-managed funds perform the same role as any other super fund, by investing contributions and making them available to members on retirement. They’re also regulated by the Australian Taxation Office. The difference is fund members are also the trustees.
So why are SMSFs so popular?
The main appeal is their ability to invest in a broad range of investments from shares, managed funds, direct property, high interest cash savings, term deposits and gold for example. And there’s no denying the upside to a SMSF is being able to decide what to invest in and when benefits are paid. The downside is running them requires much more work, though it helps that they’ve become more cost-competitive.
The ATO lists the following top 5 reasons to establish SMSFs:
- Greater control of investments
- Better flexibility and choice
- Better tax-planning opportunities
- Better investment performance of assets
- Greater cost savings vs other super funds
When you compare superannuation assets overall — $2.05 trillion as at March 2015— it is impressive that individuals running SMSFs control $520.5 billion of all super assets invested.
So if you want to get your foot in the self-managed fund door, it’s good to know that costs involved in administering SMSFs have come down. They’re much more accessible, especially for 30-and-40-year-olds who previously felt locked out due to the big balances they felt they needed to make setting them up worthwhile. And did you know there’s no required minimum balance to begin a fund? ATO figures on SMSF activity over the past year show 6.7 per cent of funds actually have assets totalling less than $50,000.
What are the costs?
Some industry and retail funds charge up to 6 per cent to run a SMSF. And some providers charge up to $10,000 a year to administer a self-managed fund. Allied Investment Group charges a flat annual fee from $1850, plus GST.
Allied Investment Group specialises in helping clients take control of their finances so they can have more choices, freedom and security in retirement.