The cut in the official interest rate to a new low of 1.5% will hurt SMSF trustees who have large cash balances in retirement phase, says SMSF Association Managing Director/CEO Andrea Slattery.
Although this low interest rate environment is cause for concern for some trustees, the Association is, however, greatly heartened by the fact that a current research report shows that those SMSFs in the transition to retirement or pension phases are typically coping “very well”.
“Research by the SMSF Association and the retirement experts Accurium shows that the medium average return of funds in these two phases of transition to retirement and full retirement is 4.2% – a real return of more than 3% after inflation, an excellent result in this volatile investment environment.
“Quite clearly such a real return shows SMSF trustees are getting good advice and are making informed decisions to ensure they are both safeguarding their capital and generating an income.”
Slattery says the research should help dispel the myth that trustees – especially in the retirement phase – are a one-trick pony with their money only in cash or fixed deposits and blue-chip Australian equities.
“The reality is trustees have been able to find ways of diversifying their investment portfolios to generate healthy returns after inflation, especially considering low interest rates and difficult investment markets, highlighting, yet again, the value of sound strategic advice.”
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