The SMSF Association is cautioning against interpreting small balance rollovers into a self-managed super fund as a warning sign of potential consumer harm.
“Measures such as imposing delays or additional friction on superannuation switching may sound appealing, but they risk adding cost and complexity to legitimate behaviour while doing little to address the underlying issues,” SMSF Association chief executive Peter Burgess indicated.
He pointed out a small balance rollover on its own reveals very little about whether a consumer is better or worse off for rolling over their super into an SMSF.
“Without the correct context around an individual’s broader financial position, their strategy and the structure of their superannuation benefits, it is an unreliable indicator of harm. In fact, the available data points in a very different direction,” he noted.
Data from software provider BGL showed over 12 months most rollovers under $100,000 were into established SMSFs with balances in excess of $200,000.
“More telling still, BGL data shows the median pre-existing balance of SMSFs receiving these smaller rollovers over the past 12 months, exceeded $450,000. These are not inexperienced investors experimenting with a new structure. They are typically engaged trustees managing and refining an established retirement strategy,” Burgess explained.
To this end he pointed out small balance rollovers may just be a part of a particular strategy a trustee is employing, such as contribution splitting which is implemented via a rollover and does not have its own distinct contribution category, and not a sector integrity warning sign.
“Because these amounts are capped at 85 per cent of the contributing spouse’s concessional contributions, they are inherently modest rollover amounts,” he noted.
He suggested insurance considerations may also be a factor as some SMSF members keep a small balance in a public offer fund to maintain risk coverage and small rollovers could merely be those balances accumulating over time to be transferred at a later date.
