The majority of SMSF trustees in pension phase are worried about investment and the associated risks, with a high level of concern about a share market decline, according to new research by Vanguard and Rice Warner.
The report, released yesterday, examined the retired SMSF segment, including risks and concerns, investment choices and product awareness, and planning and expenditure in retirement.
With about half of all assets in SMSFs in pension mode, one of the significant findings of the report was that 97 per cent of retired trustees were keeping a close eye on investment and the associated risks.
When asked about their level of concern, 70 per cent of respondents indicated they were “very” or “somewhat” concerned about a share market or economic decline.
In addition, 88 per cent of respondents were also concerned about the risk of possible changes to superannuation or taxation law.
Rice Warner senior consultant Alun Stevens said despite concerns about investment risks, there had been a big move from cash to managed funds and direct equities since the last survey in 2012.
“Investors are clearly more comfortable with the markets and keen to grow their assets for the future,” Stevens said.
The report also found the average wealth of retired trustees was high, with 76 per cent indicating their savings totalled $1 million or more.
In addition, 90 per cent of respondents were comfortable with their current financial position and 85 per cent expected to be comfortable over the next five years.
Furthermore, 94 per cent of respondents rated their physical and mental health as excellent, very good or good.
“A concern, however, is that nearly half of the respondents don’t have a written financial plan and only 37 per cent have plans that contain details of a drawdown strategy for their retirement income,” Vanguard principal and head of market strategy and communications Robin Bowerman said.
“Preparing a sound asset allocation plan and sticking to it over the long term can greatly assist investors to stay on track, given the very human tendency to react to market noise.”
The report found retired SMSF asset allocations had, on average, a much lower allocation to residential and commercial properties than the Australian Taxation Office statistics showed was the case for general SMSFs.
The report was based on a survey of 320 retired SMSF trustees in October 2013.
