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Retirement solutions could prompt fund closures

New retirement income developments that address the challenges of living longer may result in the winding up or rollover of SMSFs as part of the sector’s natural evolution.

“What [the retirement funding issue] means for planning is that we need to make sure that SMSFs have access to those new products as well, which will need government support and legislative change to get into the system,” Crystal Wealth Partners director Tim Wedd told the 2015 Self-Managed Independent Superannuation Funds Association SMSF Forum in Melbourne last Friday.

However, one of the implications of that could be that it became a common reason for winding up an SMSF, Wedd said.

“This could actually end up with conscious decisions to close funds moving forward because the money might need to go into a longevity product or an aged-care product or some other such thing,” he said.

“That means it’s not viable to keep the fund going at the end.

“Those discussions we haven’t yet really had, but that will come naturally as the evolution of the system unfolds.”

Commenting on the federal government’s response to the Financial System Inquiry (FSI) on 20 October, he said it set the foundation for the next policy debate and added that SMSFs had a pivotal role to play as they provided the ultimate toolbox.

He said clients retained control in an SMSF, had the ability to set up true longer-term investment strategies that reflected varied client goals and objectives, the structure allowed tax to be managed efficiently and provided effective estate planning outcomes.

“The [government response to the FSI] carries some very big things that we need to think about that are going to impact us, particularly when I look at it through the lens of what the role of SMSFs is going to be moving forward,” he said.

“We’re moving into an environment in our retirement system, which is different.

“We’re starting to see the evolution and the investment strategies of the current generation are not going to work for the baby boomers.”

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