PC findings will feed negative SMSF stereotypes

The Productivity Commission’s finding that SMSFs with balances below $1 million are not cost-effective and underperform has fuelled misinformation about SMSFs, potentially increasing anxiety among SMSF members and deterring possible new fund owners, according to an SMSF expert.

Heffron SMSF Solutions head of customer Meg Heffron told selfmanagedsuper an unintended consequence of the commission’s findings could be that people who should consider establishing an SMSF may defer doing so.

“They just assume that a body like the Productivity Commission is going to get things right and is going to say sensible things. They don’t realise that they’re not,” Heffron said.

She said she believes the findings could also encourage trustees who are unsure about whether an SMSF is appropriate for them to wind up their fund.

“I think those people will look at the $1 million commentary and say ‘you know what, I was thinking about winding up my SMSF anyway, no wonder it feels like a bad choice for me, even the Productivity Commission thinks you have to be very wealthy to have one’,” she said.

However, she said others who see their own fund being cost-effective will ignore the findings.

“They will say they have no interest in going back to a retail or industry fund, and will therefore just dismiss it as irrelevant,” she said.

Further, she agreed with Class’s recent submission to the Productivity Commission on its findings stating the commission miscalculated the figures and failed to compare like with like by comparing the performance of SMSFs with Australian Prudential Regulation Authority (APRA)-regulated super funds.

“So they’re therefore either drawing the wrong conclusions themselves or inviting other people to draw incorrect conclusions. They’re just wrong,” she said.

She recalled the Cooper review process where it was concluded early on that misinformation about SMSFs was rife, resulting in a lot of time and effort being spent on generating “robust” figures that could be used to talk transparently about balance sizes and expense ratios and returns.

“And it’s a shame I think that the Productivity Commission hasn’t done the same thing. If they had, they probably would have made quite different comments,” she said.

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