Further scrutiny of regulations and public policy for the self-managed superannuation fund sector could lead to more fund wind-ups and increasing interest from self-directed investors in APRA funds, the leader of the Australian Institute of Superannuation Trustees has told a room full of SMSF advisers.
“It’s the SMSF segment’s turn [to be in the public policy and regulator’s spotlight],” AIST chief executive Eva Scheerlinck said.
Following the work of the Productivity Commission in the last year and a half, Scheerlinck noted that APRA-regulated funds “have had their turn” in the spotlight.
“I don’t foresee another review of APRA funds any time soon,” Scheerlinck said.
The attention of policymakers on the SMSF sector will probably be centred on whether self-directed investors are best placed to manage their own superannuation and if their super balances justify setting up an SMSF. Scheerlinck also noted that Labor’s heavily discussed policy to remove cash refunds from franking credits would probably make the SMSF structure less appealing.
“We have anecdotal evidence from our members that they are getting more enquiries from people who want to close down their SMSF and go back into a profit-to-member fund,” Scheerlinck noted. “These are typically older members.”
Scheerlinck joined CoreData’s Andrew Inwood, Rice Warner’s Michael Rice and Self-managed Super Fund Association chief executive John Maroney during a panel discussion titled “What role should SMSFs play in Australia’s superannuation system?” on Wednesday morning at the SMSF Association National Conference in Melbourne.
There’s an opportunity for advisers to help people trade their SMSF for an APRA-regulated fund, Scheerlinck said.
“The problem [with trading an SMSF for an APRA fund] is it’s not straightforward, particularly if you have property in the portfolio, you have to liquidate it,” she explained. “It’s really the asset mix that causes this complication; there is definitely an opportunity there for advisers here.”
The SMSF sector has enjoyed a meteoric increase in funds and member accounts in the last decade and that will probably decline in the next 10 years, Rice Warner’s Michael Rice predicts.
SMSFs now account for 30 per cent of all the money invested in superannuation but Rice reckons that will drop by up to 1 per cent in the coming decade. This decline is contrary to the natural overall growth of the superannuation sector, powered by the super guarantee.
“It’s a fairly small decline and the decline is more due to the growth of other sectors than the decline in interest in SMSFs,” Rice noted. “Also, some people with very large SMSFs are getting old; as these people die and they come out of the system, they’ll be replaced with people who have smaller balances, so there will be a drop off because of this.”
Further, Rice said the small decline in SMSF funds under advice would also be a result of the fact that 55 per cent of all the money in SMSFs is in the pension phase – balances that will lead to overall FUA declines.