New SMSF creation at lowest ever level

A lack of confidence in retirement incomes policy may be one of the underlying factors in a drop to the lowest level on record in the creation of self-managed superannuation funds (SMSFs) in the December quarter of last year.

When governments tinker with superannuation rules or create uncertainty surrounding policy, it has potentially serious implications in the real world, says Aaron Dunn, managing director of the SMSF Academy.

According to Dunn, the creation of new SMSFs in the December quarter was the lowest since June 2008, when the Australian Taxation Office first started publishing such statistics.

While December tends to be a quieter quarter for new fund creation anyway, the 2011 period was significantly lower than usual. Dunn says it is unlikely that the SMSF market has reached “saturation point”, so the apparent slowdown is likely due to other factors – including “a current lack of direction on the part of Government and an accompanying loss of consumer confidence in retirement savings policy”.

“The statistics were down significantly, to the lowest, literally, since they started,” Dunn says. There were a net 5900 new SMSFs established in the December quarter of 2011, compared to 7500 in the same period of 2010 and 7300 in 2008.

“You start to think why is that the case. Is it just December?” he says.

“But when you go back and look at the history, while December is [usually] quiet, there’s a sizeable drop-off in 2011.”

Dunn says recent Self-Managed Super Fund Professionals’ Association of Australia (SPAA) and Russell Investment research, Intimate with Super, suggests one of the reasons for a slowdown in SMSF creation may also be poor investment market. “But more broadly there’s a loss of confidence in the marketplace with superannuation and the fact that we are still waiting on policy in relation to [contribution] caps,” he explains.

“This flows on to the SMSF market. People are getting frustrated and confused with super per se and that’s having a flow-on effect on SMSFs.

“The main issue is that we need some certainty and confidence from the government on retirement policy.”

Superannuation is too often treated as a “political pawn”. Dunn says there needs to be “some real certainty in the area of what can be contributed, where we can invest – that kind of stuff – to allow people to embrace it”.

“People are losing trust and confidence in it from five years ago.”

Without question, according to Dunn, governments have to understand that fiddling with the rules leads to real-world consequences.