SMSF uptake tapers

20-Aug-2014

By Elizabeth Somerville

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Retail and industry superannuation funds are experiencing a resurgence of interest, with the appeal of self-managed superannuation funds (SMSF) tapering off, according to research firm Investment Trends.

Investment Trends analyst King Loong Choi told financialobserver a recent study of nearly 2200 SMSF trustees showed retail and industry fund growth had improved while the uptake of SMSFs had slowed. 

“This is supported by figures from the Australian Prudential Regulation Authority (APRA) where over the 12 months to 2014 the total number of SMSF assets grew by 13 per cent, or $66 billion, to $559 billion,” Choi said.

“In comparison, other superannuation markets [including industry and retail] grew by 18 per cent, or $198 billion, to a total of $1276 billion.”

He said growth in superannuation funds, such as industry and retail funds, since the end of 2012 had resulted in the SMSF sector reverting back to its long-term growth averages.

Between 2011 and 2012 there was a spike in SMSF establishments, but that growth had softened, he said.

Meanwhile, one industry super fund executive said SMSF members were winding-up their funds and rejoining industry and retail managed funds due to the costly and time-consuming nature of managing an SMSF.

CareSuper chief executive Julie Lander said SMSF trustees and members were increasingly finding managing an SMSF was a long and expensive process that they misunderstood before setting one up.

“Worse still, closing an SMSF can be a very labour-intensive and technical process,” Lander said.

She added she expected the number of do-it-yourself investors looking to wind-up their SMSFs to increase and that growth would be spurred on by services to help that process.

However, SuperGuardian Xpress Super chief executive Olivia Long said the decline of the SMSF sector was exaggerated.

“It’s always amazing how the retail and industry funds point to the number of wind-ups and conclude that suddenly the SMSF sector is losing its appeal when, quite clearly, the figures suggest the opposite,” Long said.

Australian Taxation Office (ATO) figures for the five years to 30 June 2013 showed that, on average, for every five SMSFs established, one was wound up.

With gross SMSF establishments of 34,800 a year, wind-ups accounted for 7800 a year.

Those numbers clearly suggested SMSFs were increasing in popularity, with growth over the five-year period of more the 27 per cent, Long said.

“This hardly presents a picture of disillusionment,” she said.

“What we do know, conclusively, is that far more [SMSFs] are being established than are being closed down and the vast majority of these new SMSF members are coming from the ranks of the APRA-regulated funds.”

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