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Single strategy should not be assumed

A recurring misunderstanding in the industry is that only one investment strategy is required for a husband-and-wife SMSF, according to a technical expert.

“Consider the needs of each member: objectives and risk tolerance, and whether a single strategy is appropriate,” IOOF head of technical services Kate Anderson told the SMSF Association 2017 National Conference in Melbourne recently.

“In a husband-and-wife situation, typical members and trustees of an SMSF, it’s common that their retirement goals and also the long-term tolerances are the same and a single strategy is therefore appropriate, but this cannot be assumed.

“They may have different objectives and risk tolerances outside super, therefore they may have differences inside super.”

Anderson noted something as simple as the preservation rules could mean different investment time frames and different needs also for liquidity and in the payment of benefits.

“One member, for example in the case of a husband and wife, could be retired and able to commence a pension account, while the other, significantly younger, may not be able to commence a pension,” she said.

“So it’s a common misunderstanding that only one investment strategy is required for a husband and wife. It’s sometimes not the case.”

During her presentation on SMSF myth busting, she also said it might be appropriate to have separate investment strategies in relation to pension and accumulation accounts.

“When doing client reviews you need to consider whether separate strategies are required for pension and also accumulation accounts,” she noted.

“Again, it’s worth noting that with the $1.6 million transfer balance cap and any amounts over that which are withdrawn or put back into the accumulation phase, this is another consideration to have with regard to the investment strategies.

“Do you have an investment strategy that looks at the pension phase of the fund and also the accumulation phase, particularly with the implementation of the $1.6 million?

“These differences mean it’s going to be very important to consider the needs for each individual member within that fund and to create an investment strategy for those members that cater to those different needs and their different attitudes as well.”

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