Actuarial certificates are an important component in the tax status of self-managed super funds. But are they still necessary, specialised tools of taxation compliance, or headed for obsolescence?
Self-managed super funds (SMSFs) have enjoyed impressive growth in Australia over recent years. They now represent around $531 billion of the country’s total $1.7 trillion held in retirement savings, according to a report issued by Credit Suisse in early 2014.
Since 2008, the number of SMSF funds has grown by 27 per cent to 509,000, with at least 27,000 new funds being set up each year and more than a million Australians investing via an SMSF, according to data from the Australian Taxation Office (ATO).
Servicing SMSFs has also become a big business. Andy O’Meagher, director of Act2 Solutions, a large provider of actuarial services, says that SMSF trustees require actuarial certificates when funds paying super income stream benefits (pensions) to their members.
“They are needed if SMSF trustees are claiming income tax exemption from unsegregated assets,” he says.
He points to a few main pressures that are impacting players in the actuarial certificate space, including growing levels of “systemisation”. This is leading to “very strong downward pressure on prices”, O’Meagher says, adding that these pricing pressures are then passed on to those who provide services to SMSF administrators.
Another challenge he highlights is the increasing push for faster processing times. O’Meagher says that when he first started out in the industry around a decade ago, a team of four people he was part of would often process around 10 certificates per day.
“Now, an individual can get through around 100 certificates in a day,” he says, pointing to much higher levels of automation as the major driver of this. Indeed, it was his recognition of a need for greater efficiencies in this area that led to O’Meagher establishing Act2.
“When Brian Bendzulla created a unitised model for pricing [of actuarial certificates] early last decade, this was very smart for trustees and for the industry. I saw this as a process that could do with even greater levels of systemisation,” O’Meagher says.
Bendzulla Actuarial holds around 50 per cent of Australia’s market for actuarial certificates, through its relationships with around 5500 accounting firms. Having been acquired by the Challenger group at the end of 2013, its service offering to its clients – predominantly accountants and SMSF administrators – is expected to grow further still in the near future.
“We’re quite excited about it,” says Doug McBirnie, consulting actuary, Bendzulla Actuarial. “This will provide us with more resources to get on with some of the things we’ve been planning.”
