Is self-managed super the way of the future?

Share |

The fastest growing sector in the superannuation industry is that of self-managed superannuation funds (SMSFs). Although membership is limited to a maximum of four people per fund, data produced by the Australian Tax Office (ATO) as at 31 December 2011 shows there are over 458,000 SMSFs, with over 5,800 new funds established in that quarter alone!

So, what’s so super about SMSFs? Below are some key advantages that can make them an attractive choice as part of your retirement strategy:

Cost savings. SMSF fees are usually fixed whereas retail super funds are charged as a percentage of the account balance so for accounts over for example, $250,000, it can be more cost effective to establish an SMSF than to use a retail superannuation structure offered by a fund manager.
Control. With SMSFs, all the members of the fund are also trustees and are therefore responsible for all decisions. They are also required to manage the fund in accordance with relevant superannuation laws.
Flexibility. Trustees can seek assistance of administrators, accountants and financial planners in maintaining their legal responsibilities in the running of their fund or they can do it all themselves.
Investment choice. A much wider range of investments is available to trustees than may otherwise be typically offered by fund managers. This allows maximum flexibility in investment selection, especially for geared investments and non-traditional assets like artwork, bullion and certain types of landholdings.
Direct property. An SMSF can invest in direct property, whereas retail funds usually cannot. In addition, a business property owned outside superannuation can be transferred into an SMSF. For many self-employed people, having their SMSF own their business premises can make a lot of financial sense.
Taxation. SMSFs can allow trustees to take a more tailored approach to managing taxation, especially when it comes to capital gains tax.
Insurance. SMSFs can hold life, temporary disability and permanent disability insurance on their members. This can be a tax-effective way of managing both the cost of the insurance and any future insurance payouts.
Estate planning. The trust deed for an SMSF may allow for binding death benefit nominations. A Will can be challenged in court, but under a properly executed binding death benefit nomination trustees must pay a death benefit as directed. This provides greater certainty in the distribution of assets.

Despite the detailed legal responsibilities attached to SMSFs, it is clear that many people find the ability to manage their nest eggs highly rewarding. Although there are many things to consider when converting your super funds to an SMSF, the added choices, flexibility and cost effectiveness may far outweigh the additional time taken for administrative purposes. Please contact your adviser if you would like more information about these highly regarded options and find out if an SMSF might benefit you.

Source: http://www.ato.gov.au/superfunds “Self-managed super fund statistical report – December 2011, Unisuper Fact Sheet – Binding Death Benefit Nominations 2008