More Australians than ever are saving for their retirement via a self managed superannuation fund.
The SMSF sector is now the largest within the Australian superannuation industry, and when you look at the benefits it’s not difficult to see why.
An SMSF will not be for everyone, and if not done properly they can actually have a negative effect on your retirement savings. But if done for the right reasons an SMSF can certainly help you to reach your retirement goals.
In today’s guide we will look at some of the features and benefits which are encouraging more and more Australians to save for their retirement via an SMSF.
More Control and Freedom
One of the main features that make an SMSF attractive to many Australians is the added control that it gives, along with additional freedom in terms of investment choices.
An SMSF allows a member to invest their money in virtually any way that they see fit, provided that the investment passes the ‘sole purpose’ rules imposed on SMSF trustees.
An SMSF can invest in assets as diverse as artwork and even fine wine, however there are some very important restrictions in place when it comes to these types of investments.
By having complete control over the buying and selling of assets with the fund, an SMSF member can better control the tax outcomes for the fund, especially when it comes to Capital Gains Tax.
Increased Responsibility and Involvement
With added control and freedom comes extra responsibility, but this can actually be a good thing when it comes to your retirement savings.
Retail and industry super fund members can ignore their superannution for long periods of time without suffering any great consequences, as the fund managers look after the investment decisions administration work on a day to day basis.
With an SMSF however, the trustees and members must keep a constant eye on their superannuation to ensure that the returns are satisfactory and the compliance issues are being taken care of.
This increased responsibility and involvement in the fund generally leads to members taking a greater interest in the fund, and ultimately this can result in improved fund performance.
Potential for Reduced Fees
Due to the differing fee structures between standard super funds and self managed funds, SMSF members can enjoy reduced fees in many cases.
Standard super funds generally attract fees as a percentage of the overall balance, however many of the fees involved with an SMSF are charged at a flat rate regardless of the balance.
This means that once your SMSF reaches a certain balance, the flat fee will be more competitive than the percentage based fee. Ultimately this results in an improved net return for your retirement savings.
Potential for Improved Performance
There is no guarantee that an SMSF will result in greater investment returns. In fact anecdotal evidence suggests that many self managed funds actually suffer worse returns than retail and industry funds.
What an SMSF does give is the potential for improved performance, as they give the member and their professional advisers the ability to take more control over the investment options and use their knowledge and experience to chase greater returns than the market can offer.
When combined with the potential for lower fees, the result is improved net investment returns for the fund’s members.
An SMSF is certainly not the perfect option for every Australian, but when used properly and for the right reasons they can certainly offer improved prospects of a comfortable retirement.
About Shane MooreShane is a former financial adviser who has been in the finance and insurance industry for over a decade. Shane holds numerous industry qualifications and is a Senior Associate of the Australian and New Zealand Institute of Insurance and Finance.
