SMSFs are responsible for a significant portion of the retirement income system and should be given due consideration in the upcoming Retirement Income Review (RIR), the SMSF Association has said.
SMSF Association chief executive John Maroney pointed out around 596,000 SMSFs were responsible for over 25 per cent of the total superannuation system’s almost $3 trillion in assets. The fact 42 per cent of these SMSFs were also in some form of retirement phase meant SMSFs were an “integral component” of the retirement income system as a whole, Maroney added.
“A significant portion of SMSF members have transitioned through accumulation and are now navigating their retirement. They are responsible for almost half the income benefit payments in the superannuation system and almost half of all the voluntary contributions in the superannuation sector,” he noted.
“Their widespread use, effectiveness and uniqueness to the retirement income system should not be underestimated when assessing the retirement income system and the positive retirement outcomes that have resulted for SMSF members.
“In our view, the superannuation system has been too focused on the accumulation phase and this review provides a welcome opportunity to increase attention on the retirement phase. Cohort analysis on the SMSF sector will help derive information and improvements for the broader retirement income system and those individuals who have yet to start retirement.”
As part of its submission to the federal government’s RIR, the SMSF industry body also highlighted the importance of a more cohesive retirement income system.
“Ensuring that all parts of the retirement income system are working together harmoniously is essential for the system to deliver a secure and dignified retirement for as many Australians as possible. Current issues have resulted in a lack of engagement from Australians and a lack of incentives to appropriately save for retirement,” Maroney said.
Another key focus of the association’s submission was the complexity of the superannuation system and the need for superannuation policy to be removed from the annual budget policy cycle in order to simplify the system.
“This complexity means most Australians do not have a good understanding of the rules that govern their superannuation,” Maroney added.
“Dealing with regulatory change and uncertainty is commonly cited as the number one area of concern for SMSF trustees and advisers. The association believes that a successful retirement income system requires superannuation to be simplified.”
Yesterday, the Self-managed Independent Superannuation Funds Association said changes to the superannuation and retirement saving system should only be made if they resulted in improvements to the efficiency and effectiveness of the system and did not have a negative impact on savings made under preceding rules.