Strategy, Superannuation

SMSF intergenerational wealth purpose to rise

SMSFs intergenerational wealth

Over the next 10 years, SMSFs will increasingly be used as intergenerational wealth accumulation vehicles, a leading actuary has said.

A leading financial services actuary expects the use of SMSFs as intergenerational wealth accumulation vehicles to increase over the next decade and the size of funds in the sector to decrease over the same period.

Speaking at the SMSF Association 2020 National Conference Thought Leadership Breakfast on the Gold Coast last week, Rice Warner executive director Michael Rice said: “[SMSFs] will become intergenerational [wealth] vehicles and I suspect people with very large SMSFs will be putting their children in.

“It’s quite easy to withdraw $100,000 tax-free and put it in as a non-concessional contribution for their kids, and so these will become better family vehicles.”

Rice said this is one of the strengths of SMSFs because no other retirement savings vehicle can support an intergenerational wealth strategy.

He also forecast a reduction in the number of SMSFs with very high asset balances during the coming 10 years.

“I think the very large funds will go. It’s not as easy to put $100 million into an SMSF today as it once was,” he said.

“These funds will die off as [the trustees] find they can’t move the money to [other accounts] and it will get taken out of the system.”

Further, he said in the next 10 years he expected more industry funds to be working with SMSFs rather than against them. Specifically, he predicted more arrangements allowing SMSF trustees to invest in wholesale offerings through the industry fund framework, such as the initiative Hostplus announced in the back half of 2019, will become available.

Another development he anticipates over the next decade is the formation of one unified body to represent the whole superannuation industry.

“One of the difficulties we’ve got is we have far too many industry bodies and representatives so we get confused messages and we get a lot of antagonism between these bodies. {An example would be] adverts by say ISA (Industry Super Australia) attacking SMSFs or the retail sector,” he noted.

“I’d like to think that in 10 years’ time we might have one united voice to represent superannuation because if we don’t have that, politicians will cherry-pick the views that they share and we won’t make much progress.”


Key words:

Intergeneration wealth accumulation vehicles, family vehicles.

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