There should be no barriers to establishing an SMSF, either educational or fund balance, said Olivia Long, CEO of Xpress Super and Super Guardian, the specialist self-managed super fund (SMSF) administrator, in a submission to the Financial Service Inquiry (FSI).
“We would urge the FSI not to impose a minimum of funds under management before people are allowed to establish a SMSF,” she said.
“In 2010, the Cooper Review looked at minimum balances and decided against setting a limit, and we are hopeful that the FSI will reach the same conclusion.
“Since Cooper’s report there’s been no evidence that trustees are proving to be anything less than diligent managers of their superannuation, whether it’s judged in terms of compliance or investment returns, which strongly suggests the status quo should remain.”
Long says that SMSF trustees with low balances do pay a higher percentage in fees compared with APRA-regulated funds, but we argue “these people have decided that’s a price worth paying to be engaged with their superannuation.
“It will have long-term benefits in terms of these people being more likely to be self-sufficient in retirement as our evidence shows they quickly get their funds under management up to a limit where their fee structures are on a par or even cheaper than the APRA funds.
[Australian Taxation Office (ATO) statistics show that the average operating expense ratio of SMSFs fell over the four years to 2010–11 and was stable in 2011–12. This contrasts with the estimated average operating expenses of APRA funds that increased from 2010 to 2012.]
“In addition, there are flow-on benefits to all other areas of their financial lives – provided they are given all the facts when they set up a fund, their balance should not be determining factor.
“As people live longer, it is even more important that they are engaged in their superannuation at an earlier age, not less.
“The recent Roy Morgan Research ‘Superannuation Satisfaction’ report shows, people using trustees are more engaged with their superannuation compared with the industry and retail funds.”
Long also cited ATO statistics to dismiss claims that SMSFs trustees are naïve in their investments.
“The ATO found that ‘SMSFs are both flexible and resilient in their ability to concentrate or diversify asset portfolios with an ability to respond to changing economic circumstances’.
“The numbers show this: the ATO reported that the estimates of the return on assets for the SMSF sector was positive in 2011–12. And while lower than the positive returns in 2009–10 and 2010–11, the trend is consistent with APRA funds.”