Retirees: Do you still need an SMSF?

Jul 12

Key Points

Closing your self-managed superfund does not mean giving up the benefits of superannuation.
Industry funds and funds provided by large companies can all offer the same benefits, with far less hassle and risk.
It is worth regularly reviewing how you manage your superannuation - it may no longer be worth all the extra work.
Recent fraud events highlight the risk of self-managed super compared to alternatives.
Alternatives to self-managed superannuation funds are cost-effective, easy to manage and automatically report to Centrelink.

Closing your self-managed superannuation fund does not mean giving up the benefits of super. It may simply mean a change to how your savings are managed, and a big change to your obligations as trustees.

Recent events have shone a light on the risks of having a self-managed superfund - as the flexibility of “doing-it-yourself” can mean greater vulnerability to fraud as well as other unexpected challenges.

The reasons for establishing a self-managed superfund in the first place may no longer hold, making an easy to administer, low cost option far more appropriate.

Time to review your needs and look at your options

If you have had a self-managed superannuation fund for many years, you may have little knowledge of any other ways of managing your superannuation savings. There are a range of ways your superannuation savings can be managed. (It’s difficult to find a reasonable overview of this - this MoneySmart article may be a good start).

For many retired Australians, a self-managed superfund may no longer be the best way to manage superannuation savings - simply because needs have changed, and so have your options.

There is more to it - as 2020 showed some cases of fraud from the outsourcing of control to individuals, and pandemic accelerated the amount of government interaction that is done online - and this does not bode well for self-managed superannuation.

Who controls your savings? Recent events are a wake-up call

While you, as the self-managed superfund trustee shoulders all of the responsibility - you may also use the services of a financial adviser. As part of this role, they may have some delegated authority to manage your investments.

Allowing somebody else to control your accounts can be very convenient - but what happens when things go wrong?

It’s worth taking a closer look at recent fraud cases, one where a licensed financial adviser moved funds to a personal account, another where an unlicensed financial adviser took funds and disappeared altogether, and another where client funds in managed discretionary accounts where a licensed financial adviser provided misleading statements to inflate returns, losing millions of dollars for investors

These stories should be a good prompt to look up your advisor on the Financial Advisers Register - operated by ASIC, just to make sure they are licensed. Amongst the many conditions of holding a license (and there are many) are dispute resolution and insurance obligations - which make for strong client protections.

A self-managed superannuation fund, simply put, allows for more scope for fraud, and also - for less protection, as the trustees of this superannuation fund have found out.

This is why we think, in 2022, you should revisit the idea of a big company taking on the risk of compliance.

As an independent financial advisor, we can offer unbiased advice as to the most appropriate organisation to manage and administer your investments. And yes, the motivation to avoid fraud is an important part of this advice.

Self-managed super and the government don’t play nicely together

Pandemic pressure has changed the way Australians deal with the Government. So much more is done online, as it reduces face time and reduces government cost.

When the government determines eligibility for payments and entitlements - superannuation savings are taken into account.

All superannuation savings, except those held in self-managed superannuation funds - report directly to the government - making interaction with the government easy.

Unfortunately, the kind of reporting required from a self-managed superannuation fund is time consuming and confusing.

Only self-managed superannuation funds have to fill out a clunky form, that some accountants, in my experience, have simply refused to deal with.

With so many government services beefing up their online interaction, and with all the complexity of government payment and entitlement systems, the clunky reporting that self-managed superannuations funds have to go through is a very painful administration problem for self-managed superannuation fund holders.

For many retired Australians, it can mean they are not able to get what they are entitled to.

If there is no need to have your superannuation savings in a self-managed superfund, why would you make life harder for yourself?

Do you have 100 hours a year to manage your super?

Remember - no matter who you get to help you run your self-managed superannuation fund, the responsibility for things being done right rests with the trustee - that’s you. And the list of things to do, and the list of things that could go wrong is a long one.

Simply put - by closing your self-managed superfund down, and handing over your administration and compliance to a larger organisation, you move compliance responsibility to professional trustees - often responsible for administering billions of superannuation assets, and with whole teams expert in compliance.

On average, self managed superannuation fund trustees put in 100 hours per year managing their savings. If you are not putting in 100 hours, you are below the average.

An unbiased, independent financial advisor can help you select the right provider.

Alternatives to self-managed superannuation funds are better and cheaper than ever.

When you first set-up your self-managed superannuation fund (which could have been decades ago), the options may have been limited and expensive - this is no longer the case.

If you haven’t got a property, collectibles or other reason to keep your self-managed superfund open, you have some great value and effective options.

It’s an important time to review how you manage your savings - have a look and see why.

Get help to close your self-managed superfund

The government worked to make the movement of funds between superannuation funds dramatically easier in when they set up SuperStream in 2012. Meaning funds could be moved from one superannuation provider to another in a matter of days, compared to 45-60 days in the bad old days.

Unfortunately - this does not apply to self-managed superfunds, who need to go through all the clunky steps of shutting down - which is beholden with the roadblocks of administration and process.

Roadblocks which we are good at identifying and removing on behalf of our clients.

Is it time for you to close your self-managed superannuation fund?

We think it’s time to consider your options.

Brendan Ryan CFP

0412 181 031

Not sure what your next move should be?

Why not start with a phone call?

I am always keen to hear people’s stories and find ways to help.

All of my clients have unique situations, but they mostly want the same thing - to get good value and security from the big companies that help them manage their savings, to make sure they get all they are entitled to from the government, and to have confidence in their plans.

More than 25 years experience in finance, and a deep understanding of retirement and government puts me in a strong position to help you get confident you are doing the right thing, and organised in your approach.

Call me on 0412 181 031 or send me an email.