Self Managed Super Funds

Superannuation is back in the news with a raft of recommendations from the Productivity Commission about ways we can make the superannuation system better. One area under scrutiny is Self Managed Superannuation Funds. The view of the commission is that many people running self-managed funds are insufficiently skilled, and often the returns of their funds were less than what could be achieved by handing your affairs over to a retail or industry fund.

This begs the question “is it worthwhile having your own super fund”.

There is no easy answer because running your own fund is not as simple as it sounds. It involves three major jobs – administration (doing the paperwork), investment (deciding where to place the money) and arranging insurance where appropriate.

It’s certainly a simple matter to start your own fund and any accountant or financial advisor would be able to refer you to a firm that specialises in handling the paperwork such as preparation of the Trust Deed. Usually the costs to run your own fund are at least $2,000 a year so you would need to have at least $300,000 to make it viable.

But an important aspect is why you want to have your own fund.

Far too many people start their own fund after a market crash because they think “I could have done better myself”. If this is your attitude, you need to think about your track record in handling growth assets like property and shares

Having said that, I admit that there are good reasons for having your own SMSF in certain circumstances. These include the ability to hold specific investments such as property that are not available through a retail fund, or if you enjoy and are successful at trading shares or if you have complex estate planning issues.

I have no objection to anyone starting their own fund, but you need to clearly understand what you hope to gain by doing so. If you believe you are a better judge of asset allocation, or choosing shares, by all means go ahead. But you would need a good track record in this area to justify the decision – if you get it wrong you may well find that your performance is worse than the full time fund management professionals.