First-job SMSF validation needed

Value proposition SMSFs

SMSFs need to prove their value proposition to first-time workers to be considered a viable super fund for life option.

SMSFs need to present a more compelling value proposition for people entering the workforce for the first time before individuals can consider these types of funds as viable options for them to use as a retirement savings vehicle for the duration of their working life, a consultant has said.

Speaking during a thought leadership session at the recent virtual SMSF Association National Conference 2021, independent retirement consultant Amara Haqqani said: “The early accumulation [phase], right back to day dot, [is] where SMSFs need to provide a better value proposition [before being considered to be a super fund for life].

“Why would I set up a [superannuation] account that’s an SMSF when I’ve just started my McDonalds job?

“So when you have your first job, are you inclined to set up an SMSF? And the answer is no.”

According to Haqqani, the justification to use an SMSF as a super fund for life is considerably easier in circumstances involving intergenerational parties.

“If a 17 year old starts their first job and their parents have an SMSF, it might be an easy conversation to have at that point and [say:] ‘Why don’t you join the SMSF rather than going and joining one of the traditional large-scale APRA (Australian Prudential Regulation Authority) funds?’” she noted.

“That might be the key, the intergenerational piece.”

Apart from this initial phase of superannuation, Haqqani could not identify weaknesses at any other stage of the super cycle that would prevent an SMSF from being considered a good option as a superannuation fund for life.

“SMSFs are traditionally really good at the retirement end. [These funds work well] with the household and [are good for] the decumulation phase at that point in time. [They are] also great in the middle of [the] accumulation phase,” she said.

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