The SMSF Association has pushed back against claims by the Super Members Council (SMC) that small-balance rollovers are a problem for members by detailing where those funds went, while noting rollovers are a core part of the superannuation system.
Association chief executive Peter Burgess referred to research released by SMC that questioned whether small-balance rollovers, up to $200,000, should be moved to superannuation platforms or SMSFs, given a recent uptick in this behaviour.
“The data used [by the SMC] was from five large profit-to-member funds, [where] 61 per cent [of rollovers] had super balances under $100,000 and 80 per cent were under $200,000,” Burgess said.
“They are saying these people have small balances and they are rolling into an SMSF, and that has got to be bad.
“The assertion here is that someone who rolls $100,000 into an SMSF only has $100,000 in their SMSF. This is not telling the full story.
“They go on to say this is why we need a minimum balance for SMSFs.”
He added the SMC did not have any data as to where those rollovers went after arriving in an SMSF and data provided by BGL for March showed that of the 50,000 rollovers into funds it administered, 30,000 were for rollover of less than $100,000.
At the same time, 80 per cent of the total rollovers went into an SMSF with a balance over $200,000 and the median balance was over $450,000.
“This is hardly evidence of risky, poor decision-making. This is an indication of consolidation behaviour,” Burgess pointed out.
“We went to Canberra with this data and presented it to Treasury and presented it to the [Financial Services] Minister’s office along with a very strong recommendation they do not look at small balance rollovers in isolation. You need the full story as to what’s happening with these rollovers.”
He noted small-balance rollovers were a result of the superannuation system itself and they occurred when someone splits a contribution into another member’s fund, which was treated as a rollover, as were insurance proceeds held in Australian Prudential Regulation Authority (APRA)-regulated funds that were rolled over to SMSFs.
“In fact, we may even see an increase in these small-balance rollovers with the introduction of Payday Super,” he said.
“I suspect we’re going to see people using APRA funds to collect the contributions rather than use an SMSF and probably roll it into an SMSF at some point, so we may see an increase in small-balance rollovers in the future.”
Jason Spits
SENIOR JOURNALIST
Jason is a senior journalist with Benchmark Media and writes for the selfmanagedsuper website and magazine and smstrusteenews website. He has covered financial services since 1999 and has written about life insurance, superannuation, investment management and financial advice, in both a freelance and in-house capacity, and also did a brief stint as a media manager for an industry association. He has been the editor of trade titles Money Management and Financial Standard, and was most recently senior journalist with life insurance title Riskinfo.
Articles by Jason