A lack of confidence in retirement incomes policy may be one of the underlying factors in a drop to the lowest level on record in the creation of self-managed superannuation funds (SMSFs) in the December quarter of last year.
When governments tinker with superannuation rules or create uncertainty surrounding policy, it has potentially serious implications in the real world, says Aaron Dunn, managing director of the SMSF Academy.
According to Dunn, the creation of new SMSFs in the December quarter was the lowest since June 2008, when the Australian Taxation Office first started publishing such statistics.
While December tends to be a quieter quarter for new fund creation anyway, the 2011 period was significantly lower than usual. Dunn says it is unlikely that the SMSF market has reached “saturation point”, so the apparent slowdown is likely due to other factors – including “a current lack of direction on the part of Government and an accompanying loss of consumer confidence in retirement savings policy”.
“The statistics were down significantly, to the lowest, literally, since they started,” Dunn says. There were a net 5900 new SMSFs established in the December quarter of 2011, compared to 7500 in the same period of 2010 and 7300 in 2008.
“You start to think why is that the case. Is it just December?” he says.
“But when you go back and look at the history, while December is [usually] quiet, there’s a sizeable drop-off in 2011.”
Dunn says recent Self-Managed Super Fund Professionals’ Association of Australia (SPAA) and Russell Investment research, Intimate with Super, suggests one of the reasons for a slowdown in SMSF creation may also be poor investment market. “But more broadly there’s a loss of confidence in the marketplace with superannuation and the fact that we are still waiting on policy in relation to [contribution] caps,” he explains.
“This flows on to the SMSF market. People are getting frustrated and confused with super per se and that’s having a flow-on effect on SMSFs.
“The main issue is that we need some certainty and confidence from the government on retirement policy.”
Superannuation is too often treated as a “political pawn”. Dunn says there needs to be “some real certainty in the area of what can be contributed, where we can invest – that kind of stuff – to allow people to embrace it”.
“People are losing trust and confidence in it from five years ago.”
Without question, according to Dunn, governments have to understand that fiddling with the rules leads to real-world consequences.
Of course i agree with evneithyrg you say about auditor competencey. However I also see those $$ signs going up even further. There seems to be a vast amount of the retirees income being paid out in ludicrous fees mainly because the government cant get its act together and publish an understandable and unambiguous super rules that we can all understand including the ATO itself that often seems confused.Roll on Simple Super #2 My answer would be for the ATO itself to do the audit. After all they are the experts arent they? At the moment we a have a Trustee, the ATO, the admin guy, and the auditor all arguing with each other as to what the rules are especially when we enter pension land.My auditor has never met me or talked to me, neither has the administrator.Therfore I cant see why the ATO cant do it all- they can get all the info from a simple form. Especially if I provide the financials and Tax Return.Then we get rid of 2 people out of the loop.At least the ATO will talk to you even if it means going through their manager and their managers manager to get the correct answers. Also the ATO have all the bank account statements and share info so most of its done- for a simple fund anyway.PS we dont need an auditor for our income tax, and that is 10X the amount of super in cash flow. There would be blood on the street if you suggested that!!So lets get rid of the auditor completely and let the ATO do it !-and stop the $ leakage to the finance industry
When FOFA “Opt In” kicks in, the number of new SMSFs will explode. Just watch this space.
Simon/Aaron,
ATO Statistics have been published since June 2004 and you should be wary of the published ATO statistics – the information varies greatly as time goes by. For example the December 2010 establishments have been variously reported as
5964 (Dec 2010 Statistical Report)
9955 (Mar 2011 Statistical Report)
10020 (Jun 2011 Statistical Report)
7424 (Sep 2011 Statistical Report)
7564 (Dec 2011 Statistical Report)
The numbers for the last quarter are generally undertstated as SMSFs have 60 days to lodge the election to become regulated form. The published data is generally extracted well before the lodgement time limit.