Business News, Regulation

SMSF sector will be reviewed in time

SMSF; review; industry fund

The head of a major industry super fund has claimed the SMSF sector will be reviewed, but has not identified any structural problems requiring a review.

The SMSF sector will undergo a review due to a number of instances of misconduct and mismanagement, according to the head of a major industry superannuation fund.

When questioned as to whether an inquiry was required into the SMSF sector following the release of a Productivity Commission report into the superannuation industry earlier this year, Sunsuper chief executive Scott Hartley said: “There will be an inquiry into SMSFs at some point. I think there is a lot of misconduct and mismanagement in that space, so it will get some focus.”

Hartley made the comments as part of a superannuation panel at the Bloomberg Buy-side Forum in Sydney today, but did not elaborate on his answer while on the panel.

Speaking with selfmanagedsuper after the panel discussion, he identified sales practices around property and related advice as areas of concern rather than SMSFs as superannuation savings vehicles.

“I see the misconduct in property spruiking, particularly around Queensland, where there has been people saying you can set up an SMSF, buy an apartment on the Gold Coast and have one asset in the fund, and that is going to end in tears,” he said.

“There is not a particular problem across the sector, but it is going to be in pockets based on people’s vulnerability to bad actors.

“The mismanagement part is that people with small balances getting into an SMSF is nuts. It will be expensive and unlikely to perform compared to a simple default fund, so that is where there is mismanagement, but it is still in people’s hands to do what they want to do.

“Good advisers are not going to put someone with a small balance into a SMSF, they would not do that, so there might be some advisers who do that, but I would not put them in the good advice bucket.”

He said he regarded SMSFs as a useful superannuation vehicle for some sectors of the community and was not interested in restricting who can use them.

“These vehicles have a legitimate place for certain types of consumers with sensibly large balances, but the concern remains about people who should not be in a SMSF who are being encouraged into one, from whatever points that is happening.”

Earlier on the panel, Financial Services Council chief executive Sally Loane said the presence of SMSFs was about choice and their position in the market provided balance in relation to other superannuation offerings.

“The presence of SMSFs is about choice and the superannuation industry is divided into thirds, which is a reasonably good balance and in that some people want to be masters of their own destiny,” Loane said.

“When looking at the average level of funds [in the SMSF sector], you get a sense things are not as healthy as they could be, but median rates appear a little better and because of the tax concessions on super the system must be efficient, and if all taxpayers are going to support the system, then every part of it must be efficient.”

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