Joshua Williams (left), Meg Heffron, Peter Burgess and Jo Hurley (photo: Anthony Burns).

Members of SMSFs are significantly more likely than members of APRA-regulated funds to take advantage of tax-exempt income streams after turning 65, research has revealed.

The ‘2023 Annual Benchmark Report’ from SMSF administrative provider Class shows that roughly seven out of every eight SMSF members aged over 65 have set up tax-exempt retirement income streams, compared to only one in two members of APRA-regulated funds.

The findings highlight the urgency for APRA-regulated funds to develop effective responses to their Retirement Income Covenant obligations, so members of APRA-regulated funds aren’t unduly disadvantaged by a lack of access to professional advice or better information and guidance about how to maximise their superannuation benefits.

“This is big,” Class CEO Tim Steele said, presenting the data at Class Ignite in Sydney on Wednesday Morning.

“This is a significant point of difference in terms of engagement and outcomes ultimately for members of an APRA fund compared to a member of an SMSF.”

Accurium principal Melanie Dunn wrote in the Class report that “attaining age 65 is an important condition of release for becoming eligible to commence a tax-free retirement phase income stream in superannuation”.

“Where members remain in accumulation phase, those accounts are subject to a tax rate on earnings of 15 per cent and are not paying members a retirement income,” she said.

Steele posited that this difference came down to SMSF members being more engaged with their super, and more focused on achieving the best outcome.

Tim Steele

“The investment strategy imposed on trustees requires them to think of their member objective and cash flow requirements when they retire,” Steele said on Wednesday morning.

“Trustees, we believe, are more likely to seek professional advice from accountants or advisers to commence a pension.”

SuperGuardian chief operating officer Joshua Williams said the retirement-income phase statistic left him “scratching my head”.

“[I was] just trying to work out if the calculation was wrong or the number was wrong,” he said.

“It’s astronomical. Perhaps not surprising… but the stark reality from my perspective is that there are so many Australians out there that are not getting the advice they need.”

While the number of SMSF members aged 65 or older in retirement income phase was significantly better than APRA-regulated fund members, Williams said it still isn’t good enough and advice is needed to reduce the number still in accumulation phase even further.