The latest industry research has shown the COVID-19 pandemic has improved SMSF sector growth with regard to fund establishments over the 12 months to March.
“The past year has seen just over 22,000 newly established SMSFs in the year to March 2021 … This is actually higher than the year before, so I think it’s to be commended in such a time of disruption. [So] we’ve seen the establishment rate continue at pace,” Investment Trends head of research Irene Guiamatsia observed while presenting the findings of the “Vanguard/Investment Trends 2021 SMSF Investor Report”.
Guiamatsia did, however, acknowledge the rise in the number of SMSF set-ups from March 2020 to March 2021 did not mean the sector had returned to the growth levels experienced in 2013. Back then establishment rates were increasing at 8 per cent a year, with around 40,000 SMSFs being set up in a single year.
“But the rates are still really, really strong, especially with the disruption we’ve seen [recently],” she said.
The research also confirmed the trend reflected by recent ATO periodic data that more individuals are starting their own SMSF at a younger age.
To this end, the Investment Trends study revealed the average age of a person setting up an SMSF between 2015 and 2021 was 46.
This represents a slight drop from the period spanning 2006 to 2014 where the average age of people establishing a retirement savings vehicle of this type was 48.
Guiamatsia pointed out a fall in the average balance of new funds has coincided with the reduction in the average age of individuals setting up SMSFs.
“The age of [people representing] SMSF establishments actually peaked around [the time of the] Simpler Super reforms where the average balance was about $510,000,” she noted.
“But in recent years that has gone down a little bit and you’re looking at SMSF establishments [over the past six years] with an average balance of $420,000, which is substantial.”
The report was put together using the responses from 2523 trustees who participated in an online survey during March and April.
The study also found a slight shift as to why people are choosing to run their own super funds.