The latest research into the SMSF sector has produced results showing claims SMSF trustees are underinsured may be exaggerated.
The fifth annual “Intimate with Self-Managed Superannuation” report compiled by research house CoreData on behalf of nabtrade and the SMSF Association revealed 29.9 per cent of SMSF trustees had risk cover within their funds, while another 21.2 per cent of them held risk insurance in a separate Australian Prudential Regulation Authority-regulated fund or outside of super.
“What people forget about when they start to compare people with an SMSF with people with other forms of super is that SMSF trustees have [wealth components] outside [their fund] and they balance and weight what is in the SMSF with what’s outside,” SMSF Association chief executive Andrea Slattery said.
“So this is actually banishing or eroding slightly the concept that there is underinsurance, particularly around the SMSF trustee market.”
CoreData principal Andrew Inwood said the make-up of SMSF trustees dictated underinsurance would not be a real issue among those who ran their own retirement savings funds.
That was because most SMSF trustees understood what they were doing and the issues they had to address, and those within the group that received financial advice would be informed about the importance of insurance through that advisory channel, Inwood explained.
“So what we’re discovering here is that intelligent Australians who are making good financial decisions tend to have insurance. It’s unsurprising,” he said.
Slattery also pointed out 72 per cent of survey participants considered insurance as part of their investment strategy.
“That’s showing there is a definite decision being made about insuring in super or not. That is actually breaking the myth yet again that people are not engaged enough to consider insurance,” she said.
In terms of demographics, the report found younger SMSF trustees were more likely to hold risk cover inside their funds, with 73.2 per cent of gen X respondents and 66.7 per cent of gen Y respondents saying they had insurance within super.
