Is Santa bringing you a self-managed superannuation fund (SMSF) this Christmas?

Blog: Ho ho ho - is it time to get serious about self-managed super funds?

That may sound like a strange question but the fact is that for some, a SMSF would be an excellent present.  Of course, no-one would have that on their Santa wish list and I doubt Santa would (or even could) leave you one under the tree – it really is a much more serious matter than that.

There are in excess of 500,000 SMSFs in Australia looking after the retirement savings of over 1 million Australians.  All up, SMSFs hold over $500 billion in assets so it is certainly a significant part of the retirement funding process.

Approximately 450 SMSFs are created every week and about 25 are also closed down each week so the number of active funds will continue to grow (It also shows that not all SMSFs are successful!).

So, how do you know if a SMSF will work for you?

  • First, consider fund size. If you (and your partner) have a minimum of $200,000 in superannuation, it may be economical for you.  To cover the costs of accounting, audit, investment advice and government fees, the earnings base of your SMSF must be large enough to generate sufficient income to leave a surplus.  Obviously, the more you can do, the lower the outsourcing costs will be but the costs of getting it wrong can be severe so be realistic about your skills.
  • Next, consider whether you have the time to devote to the process. While it is possible to outsource (at a cost - see above) most of the time-consuming duties, you will still need to consider and make some decisions (with or without advice) about the future plans for your superannuation fund.  Maintaining documentation is important if you are going to satisfy the auditor and this alone can be a challenge to some fund trustees.
  • You also need to consider whether you have sufficient investor skills. Again, it is possible to consult experts but ultimately the investment decisions are your responsibility so you need to be sufficiently financially literate to understand the implications of any investment proposal.  Here you need to think ahead.  You may be able to undertake this role now but how will you be in (say) 10 years? 

If you haven’t already made the decision to set up a SMSF, please don’t ask Santa to bring you one.  Forget about if for a couple of weeks but make a New Year resolution to investigate whether a SMSF would work for you.  If the answer is “No” or “Not yet”, at least you have made an informed decision to stay out of that system.

Otherwise, take charge and seek any help you need to establish and manage your own retirement nest egg.