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Do I need a self-managed superannuation fund?
By Kathryn Creasy
Having a self-managed superannuation fund (SMSF) allows you to have control of your superannuation investments and allows for flexibility in estate planning – but did you know it’s likely you can achieve what you are looking for with a different type of fund?
Firstly – What is an SMSF?
An SMSF is a superannuation structure that is managed by its members, it gives individuals the flexibility to manage their own superannuation benefit and have the ultimate control over how it is invested.
As a member you must also be a trustee, and that comes with a number of obligations. To act in the best interests of all the members of the fund, to keep records of all of the decisions of the trustees, to ensure that tax returns are lodged, and financial statements are prepared and audited. It is certainly more onerous than being a member of an industry or retail superannuation fund, where all the compliance tasks are taken care of for you.
Why do people choose to start an SMSF?
There are many reasons people choose to start an SMSF, but the main reason tends to be for greater control of investments – they may wish to invest in property (commercial or residential), they may be dissatisfied with the returns or investment choices of their default industry fund, or their superannuation balance has grown, and they feel obliged to take a more active role in management of the investments.
However, aside from investing in property, which you do generally require an SMSF structure for, taking greater control of your investments doesn’t actually necessitate an SMSF.
What are my other options?
If you want greater control and transparency of your investments than the superannuation fund your employer selected for you allows – you also have the option of opening a private superannuation fund.
Many large financial institutions offer a private superannuation fund structure (often known in the industry as a retail superannuation fund), and the appeal is that they provide the administration platform and take the trustee and compliance obligations away from you, but still offer you a world of flexible investment choices. Historically these funds were higher cost and targeted at a white-collar audience, but these days the cost is competitive and the flexibility warrants the outlay.
From ASX listed shares to wholesale managed funds, there are thousands of investment choices available – and whilst there are some investment restrictions, these are generally a positive because they steer you away from putting too few eggs in one basket. For example, they may limit the value of the fund that can be invested in any one share, usually about 25% of the fund for an ASX top 20 stock (which stops you from punting 100% of your fund on Telstra).
If you’re keen to take control of your superannuation investments but don’t want the burden of being a trustee – it’s very likely a private superannuation fund could be the answer.
The investment strategy is tailored to your personal situation and requirements, and it can be particularly useful when you begin drawing down on your superannuation investments and wish to manage which assets the cash flow is coming from.
If you want to explore your options, please contact Capital Partners via our website contact form or by calling 6163 6100.
Kathryn Creasy is a Private Client Adviser with Capital Partners, FPA Professional Practice of the Year, and is committed to helping people live richer, happier lives.
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