Understanding Self-Managed Super Fund performance

We, at Required Financial Services Pty Ltd, are actively involved in providing you and your self-managed super fund (SMSFs) with ongoing strategic and investment advice whilst helping you build your retirement savings.

A well-developed financial plan for your SMSF will assist with building your retirement nest egg. With specialist advice and proper planning, there are several SMSF benefits that can help build your future superannuation benefits.

We are sharing with you the summary and fact sheet of new research released by the University of Adelaide, which provides tangible evidence of the benefits of investment diversification via an SMSF structure.

This research also establishes a new threshold at which SMSFs become competitive with APRA-regulated funds (ie Industry & Retail Super Funds), and shows for suitable individuals, SMSFs can be a viable option for individuals with lower superannuation balances than previously thought.

In its report, titled “Understanding Self-Managed Super Fund Performance” and using data from over 318,000 SMSFs between 1 July 2017 and 30 June 2019, the University of Adelaide explored the relationship between the investment performance of self-managed super funds (SMSFs) and their level of diversification across multiple asset classes.

Reporting, ID changes

The latest changes also simplify reporting for super funds, the federal government says.

“[This will] reduce costs and simplify reporting for superannuation funds by allowing trustees to use their preferred method of calculating exempt current pension income where the fund is fully in the retirement phase for part of the income year, but not for the entire income year,” says superannuation minister, Senator Jane Hume.

“This measure will apply for the 2021-22 income year onwards.”

Other changes introduced in the Treasury Laws Amendment (Enhancing Superannuation Outcomes For Australians and Helping Australian Businesses Invest) Bill 2021, which was passed on February 10, included removing the $450 per month income threshold under which employees do not have to be paid the super guarantee by their employer.

Other changes for 2022 include for company directors, including directors of an SMSF corporate trustee, which are required to obtain a director ID by November 30. There are also new compulsory electronic data transmission rules for SMSFs rolling over funds to and from other funds.

Pending measures

Other measures still in the pipeline – yet to be approved by Parliament – include those concerning changes to SMSF residency rules and a two-year amnesty for legacy pensions.

“The former will allow SMSF members to continue to contribute to their SMSF while temporarily overseas,” says John Maroney, CEO of the SMSF Association.

“Under the current rules, contributions are prohibited unless a complex active member test is satisfied.

“The changes to legacy pensions are designed to simplify the retirement system by allowing super fund members in older complex pension products to move to more flexible, contemporary income streams.”

The recent flood disasters on Australia’s east coast may also spur the government to maintain the 50% reduction on the minimum required pensions, according to Verante’s Shorte.

“Otherwise, people need to ensure they have the liquidity to pay the full minimum pensions from July 1,” he says.

“This might be a positive vote winner for retirees.”

While SMSFs closely watch the upcoming budget, a potential Labor government post-May may also spur further changes to the sector, including limited recourse borrowing arrangements.

However, unlike the 2019 election, Labor has indicated it will not be proposing a raft of superannuation changes in May’s poll.

“We took to the last election a bunch of savings out of superannuation, which we won’t be taking to the next election,” Shadow treasurer Jim Chalmers was quoted saying by the Australian Financial Review.

This includes ruling out a $5 million cap on super balances, as proposed by the SMSF Association, the Australian Institute of Superannuation Trustees and others.

Regardless of rule changes, either planned or possible, the SMSF sector appears set for further growth in 2022.

“Amid all this uncertainty, one thing looks certain: the SMSF sector will continue growing strongly, with the number of funds expected to surge past 600,000 for the first time and the number of SMSF investors expected to surpass 1.13 million,” Maroney says.

“SMSFs are not an appropriate or preferred retirement savings vehicle for everyone, but it seems the more unpredictable super becomes, the greater the appeal for individuals to manage their own retirement savings and retirement income strategies.”

For more information  that help you decide if a Self-Managed Super Fund (SMSF) is right for you, and how to set one up.

Download Guide

For more information:

https://www.required.com.au/static/uploads/files/starting-a-self-managed-super-fund-wfwkefljvyou.pdf

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