People often talk about self-managed super funds (SMSFs) being time-consuming or requiring particular skills. Whether or not this is true depends on how much of the work trustees intend to do themselves. Pretty much anything can be outsourced, but of course each time you pay someone else to do something for you, the costs increase.
Trustees can pay other people to…
- Receive and handle funds’ mail (checking in with trustees when decisions need to be made);
- Manage the day-to-day administration of fund investments;
- Choose specific investments for trustees. For example, if trustees have managed funds, exchange traded funds or external mandates to make those choices within overall plans;
- Attend to the compliance work of lodging returns, et cetera – again, checking in with you to authorise sending them to the Australian Tax Office or the Australian Securities and Investments Commission;
- Pay all bills, collecting income (checking in with trustees for authorisation);
- Where applicable, manage any property investments, such as an agent that handles rent or repairs, et cetera; and
- Advise trustees on when to make changes at the compliance and tax/estate planning levels.
Such outsourcing can be expensive at, say, $5000 per annum plus investment costs as a guide to the order of magnitude, but will reduce the time trustees need to spend working on their funds to potentially less than 10 hours a year.
It will also set the bar fairly low when it comes to having specific skills to run SMSFs – the major activity for which trustees will need skills will be in selecting appropriate suppliers for the work they choose to outsource and ensuring they are able to assess whether or not they are doing a good job. In terms of skills required, this is not unlike choosing a good doctor, lawyer or accountant.
Do it yourself – at least some of it
At the other extreme, trustees can do some or all of these things themselves. Those who actively manage their investments and handle all the compliance aspects themselves, for example, can spend more than 10 hours per week on the job, but can reduce their costs to $1000 to $2000 per annum plus minimal investment costs.
The traditional model is to pay someone else to do the accounting and compliance work, but simply handle the routine paper work and investments, with varying degrees of input from advisers, personally.
The paper work side will depend on the complexity of investments; the more investments, the more institutions will be sending things to trustees. However, as a guide trustees with listed shares through brokers, some cash and some term deposits could expect to spend an hour every few weeks, or about 20 hours per year, reviewing correspondence, taking any action required, passing tasks on to and dealing with queries from their accountants and/or administrators.
SMSF trustees could also expect to spend some time (which will vary with interest and the amount of external input) reading newspapers and other publications (such as newsletters or correspondence from their accountant/administrator) to keep up to date with changes.
If suppliers cannot provide enough support to ensure that trustees’ knowledge is sufficient to meet their obligations without extensive research, then trustees should find new suppliers.
Sticking with a big fund
Remaining in a large superannuation fund, potential SMSF trustees will not be responsible for keeping the fund running, but will need some particular skills and to devote some time to their super.
- If members need information that is not available in the routine correspondence they receive from their funds or websites, they will need to develop call-centre patience and not swear at the phone (“Because your call is important to us and is being recorded”);
- If funds make mistakes that members wish to correct, members will need excellent diary reminder systems so they can follow up, possibly many times. Members cannot assume that someone at the other end of the phone will take ownership of problems and resolve them; and
- If mistakes are unusual, members must be willing to insist on speaking to supervisors after hitting the first brick wall. They must be prepared for the fact that supervisors won’t know either. Members may stand a better chance with the supervisor’s supervisor… or pay an adviser to deal with it for them.
Of course, whether people have SMSFs or participate in large funds, their super is likely to be an important part of their retirement savings plans. Inevitably, getting the most out of funds and the tax laws surrounding super requires effort. Also perhaps inevitably, it will benefit superannuants to get some independent advice (that is, from someone who doesn’t work for their super funds) on whether there is anything they could or should be doing differently.
