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SMSF returns “healthy”, says report

SMSF members moving into retirement enjoyed healthy returns in the 2014 tax year, with the median balance rising 5.2 per cent even after pension drawdowns, according to a new report from Accurium.

The “SMSF Retirement Insights: Bridging the prosperity gap” report, which analysed over 65,000 SMSFs, revealed strong investment markets buoyed SMSFs, which achieved investment returns of 8.2 per cent before tax but after fees, in one of the best performances in recent years.

The typical trustee couple withdrew a net $12,000 from their funds as many were using a transition-to-retirement strategy, the report said.

The research also found the median balance for SMSF households moving into retirement was now materially over $1 million.

Median balances for SMSF couples in this cohort rose to $1.09 million in 2014.

“The good news is that strong investment returns in the past two years have produced relatively large increases in balances,” Accurium chief executive Tracy Williams said.

“SMSFs are in the comfort zone for retirement, however, for most, a more prosperous retirement lifestyle remains out of reach.”

The report showed a 65-year-old couple would need about $900,000 to have a reasonable degree of confidence that they would achieve the comfortable standard of a $58,784 income per year for life, as set by the Association of Superannuation Funds of Australia (ASFA).

The 2014 median SMSF balance for 65-year-old couples was $1.16 million, according to the report, which was materially above what they required for that level of spending.

Comfortable retirement age, when trustees had reasonable confidence of achieving the comfortable standard, was now 60 for couples with a median balance, down from 62 in 2013.

While these figures assume continued spending at the same level, in reality retirees’ spending patterns changed as they became older and when a spouse passed away.

Allowing for that could have a significant impact, the report said.

Furthermore, the research showed 65-year-old couples happy to accept that their spending would reduce as they aged would need $591,000 to be reasonably confident of affording an ASFA-comfortable lifestyle.

However, SMSF trustees who aspired to a more prosperous retirement lifestyle had further to go, it said.

Only 28 per cent of couples aged between 55 and 70 can be reasonably confident of affording a lifestyle costing $100,000 per year for life if they retired today, even allowing for reduced spending later in life.

“SMSF trustees are prepared to work longer and retire later to achieve financial security,” Williams said.

“There are around 31,000 trustees in our database who are still contributing to and growing their retirement savings beyond the age of 65.”

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