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COVID-19 to spur SMSF growth

SMSF growth

The coronavirus pandemic is likely to boost the number of SMSFs as people re-examine their financial affairs in the wake of the virus crisis.

SMSF Association chief executive John Maroney has predicted an increase in the growth of the SMSF sector as a result of the COVID-19 pandemic.

“I think there will be continued growth [in the SMSF sector]. Generally we’ve seen that post crises is when people think about setting up self-managed super funds because they have some concerns in terms of where they’ve been, and I think a lot of that reflects lack of engagement until something causes people to say: ‘Is there a better approach?’” Maroney said during the thought leadership panel session at the industry body’s Technical Day 2020 today.

“We always say self-managed super funds are not for everyone, but there are over a million people in them now and I expect there will be another million people over some future time frame.”

While he anticipated sector growth, he was unsure if SMSF assets held would reach the $1 trillion earlier forecast by actuarial firm Rice Warner.

Fellow panellist Rice Warner executive director Michael Rice recognised SMSFs have an additional benefit over the Australian Prudential Regulation Authority (APRA)-regulated funds that could lead to a boost in their numbers over the coming years.

“One of the things to note is technology backing the administration of SMSFs is far superior to APRA-regulated funds,” Rice said.

“So you can have a husband and wife with an accumulation and a retirement account, account-based pension, all in one structure, whereas the APRA-regulated funds still work on accounts, not family expenditure. That causes them a lot of problems.

“So in an SMSF it’s all structured in one place. [That means] one adviser and the assets are pooled. I think the technology here is well ahead.”

He identified fees as another competitive advantage SMSFs had over public offer funds and a factor that will underpin their growth in the future.

“Think about fees, [ignoring] the ASIC (Australian Securities and Investments Commission) fact sheet, which is hopelessly out of date. The fees for running an SMSF are very low,” he said.

“It shows that you can get good value through [these types of funds so] I’m pretty bullish more SMSFs will be formed because of this.”

Rice Warner had previously also labelled SMSFs as retirement income leaders.

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