Pension SMSF preferences uncovered

A man and a woman read a map.

Report unveils retiree SMSF investment inclinations.

A new report has revealed SMSFs in pension phase are attracted to higher-yield stocks when compared to funds in accumulation phase.

The Class “December SMSF Benchmark Report”, released today, found on average, pension SMSFs earn a 7 per cent higher gross dividend yield on their Australian Securities Exchange (ASX) shares versus their accumulation peers and the ASX 200 Index, which provides a yield closer to 5.6 per cent.

The report highlighted pension SMSFs had a strong preference for domestic equities over international shares.

Investment in domestic equities sat at 33 per cent of gross assets for pension SMSFs versus 23 per cent for accumulation SMSFs, the report said.

Investment in international equities sat at 1 per cent for pension SMSFs and 1.2 per cent for accumulation SMSFs.

According to the report, this preference for domestic shares was likely to be influenced by franking credits, which are heavily used by Australian companies and not generally available for international shares.

It also found pension SMSFs were less interested in direct property, with the average accumulation SMSF allocating nearly three times as much to residential property.

Accumulation SMSFs were also far more likely to invest in residential property and were 12 times more likely than pension SMSFs to borrow money to do so.

“Pension SMSFs have always been cited as a conservative group who are heavily focused on yield,” Class chief executive Kevin Bungard said.

“Our data analysis from the more than 150,000 SMSFs on Class validates this, but importantly delivers depth around the types of investments retirees are embracing.

“It will be interesting to track how investment preferences change over time as a new set of SMSFs move into pension phase.”

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