The SMSF sector’s overall market share and assets under management are likely to emerge relatively unscathed from the federal Budget – at least over the medium term.
This is despite the series of Budget provisions clearly aimed at wealthier, big-balance fund members who make the most of the tax treatment of superannuation, particularly in the tax-exempt pension phase. Such members, of course, often tend to favour SMSFs.
The extremely high proportion of SMSF assets in retirement assets together with older membership demographics will mute the Budget’s possible negative impact on the sector’s market share for the next few years. Many of the funds in the retirement phase would have already reached their peak size and are drawing down to pay pensions to fully retired members.
Retirement market share
Rice Warner estimates that SMSFs today hold 54% of the superannuation retirement assets against just 2.5% by industry funds and 33% by commercial funds. And SMSF trustees will undoubtedly try to ensure that these assets remain in the superannuation system for as long as possible.
The Budget proposals if introduced will all but stop the creation of super-large SMSFs in future and significantly reduce the strategy of recontributing pension payments rather than immediately eroding the size of established funds.
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