The SMSF Association has said the Productivity Commission’s draft report into superannuation is a timely reminder to SMSF trustees to pay close attention to the fees and costs their funds incur to ensure retirement savings are being optimised.
Association chief executive John Maroney said the report had a clear message for SMSFs about the negative impact of fees and costs on their retirement incomes.
“It’s a critical issue demanding the close attention of trustees and their advisers,” Maroney warned.
“With the commission finding that lower-balance SMSFs have higher costs than their counterparts, it is important that trustees understand and manage their SMSF in the most cost-effective manner while maintaining the quality of the administration and advice they seek.”
In particular, for SMSFs starting off with a lower balance it is essential they have a plan to achieve greater scale and cost-effectiveness as quickly as possible, he added.
“To achieve this goal, the association strongly recommends trustees receive specialised SMSF advice from accredited and appropriately qualified professionals to ensure that their fund is fit for purpose and achieves the best outcomes over the long term,” he said.
According to the most recent ATO annual SMSF report, of the SMSFs established in 2012, 51 per cent reported total assets below $200,000 in 2012.
Comparatively, this asset range made up only 20 per cent of funds still active in 2016.
Maroney said this demonstrates funds that start with lower balances are generally achieving scale quite quickly.
The commission also stressed the number of new SMSFs with very low balances, under $100,000, fell from 35 per cent of new establishments in 2010 to 23 per cent in 2016, which was another positive sign for the sector.
“It’s also important to remember that many lower-balance SMSFs have either just been established and will gain size as shown, or they are in the process of exiting the SMSF environment,” Maroney said.
“This subset of SMSFs is constantly shifting and evolving with many nuances.”
