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Significant cash return differences for SMSFs

Comparison site Mozo has found a substantial differential exists among the returns from cash products servicing SMSFs that could be reducing fund performance for trustees and members.

The analysis was performed as part of the Mozo Experts Choice Awards, which assessed 27 savings accounts and 31 term deposit offerings and found the gap between the returns of some unconditional cash accounts can be as large as 1.4 per cent a year.

“On a $200,000 cash balance, that’s a difference of $2834 in interest in a year,” Mozo data insights director Andrew Duncanson said.

“Over time, that’s going to be a big difference to the fund’s balance and your life in retirement.”

The contrast in returns was not as high with term deposits as the comparison showed a differential of 1.15 per cent for a five-year term.

Again, when applied to an amount of $200,000, this meant a difference in yield of $11,500 over a five-year period.

When assessing the gap in returns, Duncanson warned SMSF members not to accept a lower interest rate based on the perceived safety of the institution involved.

“Whether you’ve got $5000 or $250,000 in cash to invest, don’t think that there is some kind of trade-off between a lower interest rate and big bank safety,” he said.

“All deposit-taking institutions compared for our awards are covered under the government’s deposit guarantee scheme. We urge you to shop around and get the best rate you can.”

In regard to the Mozo Experts Choice SMSF Deposit Awards, RaboDirect won the SMSF Savings Bank of the Year.

In the Best Value No Strings Savings category, consisting of accounts with no monthly service fee, unlimited free internet transactions and no notice period for withdrawals, ME Bank, Rural Bank One and Westpac joined RaboDirect as winners.

ANZ and RaboDirect won the Best Value SMSF Kick Start category consisting of accounts offering the best interest rates for the first year.

Finally, the winners in the Best Value SMSF Regular Saver category, incorporating bonus rate accounts, were CUA, Westpac and RaboDirect.

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