An SMSF technical expert has predicted the attacks launched on the sector by the industry funds last week will continue in the immediate term in the wake of the Productivity Commission findings.
Australian Super chief executive Ian Silk last week called for a clampdown on SMSFs in accordance with the Productivity Commission finding that SMSFs with balances under $500,000 are not performing as well as public offer funds from a return and cost perspective.
“Industry funds are going to be using [the Productivity Commission] data and we’re going to see a fairly large change in resources from the promotional money being removed from targeting the retail environment, they’ve won that war, and now moving into the SMSF sector as they start to become the biggest part of the superannuation landscape,” Smarter SMSF chief executive Aaron Dunn predicted during his latest technical seminar.
Dunn also rejected recent calls from the industry super sector for a new review into the SMSF sector, pointing out several reviews of this nature had already been performed recently.
“They’re clearly forgetting the fact that in the Cooper review back in 2010 at that point in time the sector had been found to be well-functioning,” he said.
“Even beyond the improvements since that point in time I would find it pretty hard to argue that it would be anything other than well-functioning as it stands today and continues to improve.”
Further, he challenged the Productivity Commission’s finding that SMSFs with balances below $500,000 had generated materially lower returns as to whether this conclusion was based on an accurate comparison between all of the different forms of superannuation funds.
“There’s a real question, of course, as to whether we’ve got apples and oranges in comparing the data and Class and the SMSF Association, for example, in their responses made that issue very clear,” he said.
He also dismissed the commission’s concerns over the number of SMSFs operating with lower balances.
“Finding 3.8 was about 42 per cent of all SMSFs have been under $500,000 for at least two years and appear to persist with those higher average cost ratios and therefore lower returns,” he said.
“The proportion of new SMSFs with very low balances has fallen from 35 per cent to 23 per cent so the awareness to what the right balance is and the advice that is being provided is clearly starting to suggest that $100,000 isn’t really the tipping point.”
He said he believed the appropriate retirement savings balance to have when looking to establish an SMSF is $300,000.
