Superannuation

DIY super pros and cons

For people who are committed and informed, DIY super can be a powerful way to save for retirement.

According to an Investment and Financial Services Association (IFSA) survey the three most common reasons people set up DIY super fund are:

  • to exercise more control over their superannuation
  • dissatisfaction with current superannuation performance and charges
  • at the suggestion of their accountant's or financial planner

DIY super funds are different from other superannuation funds as all members are trustees (or trustee directors, if the fund has a corporate trustee). Members are responsible for running the fund including investing the fund's assets, paying benefits and meeting the administrative and compliance requirements of the fund.

What are the benefits of DIY super?

  • As a trustee you have greater control over the investment strategy, asset mix and ongoing management of your portfolio.
  • You have greater flexibility when it comes to investing your assets, retirement income options and estate planning.
  • By choosing your investments carefully and keeping transactions to a minimum, you can reduce the ongoing fees of the fund.
  • You can take advantage of the tax concessions available in the super environment. Investment income earnings are taxed at a maximum rate of 15% rather than your marginal tax rate.

What are the disadvantages?

Setting up your own DIY super fund is not a decision to be taken lightly as it carries responsibilities and risks.

If you are considering setting up a fund, you will need a sufficient superannuation balance to make it worthwhile. DIY super funds can be costly to establish and administer - IFSA estimates the average cost of setting up a DIY super fund is $3,500.

You also need the skills and time to manage your own fund and meet your trustee responsibilities. As trustee, you are responsible for keeping records, meeting reporting requirements and investing assets according to your investment strategy. Failure to comply with superannuation laws can have serious consequences. You also need to remember the sole purpose of your DIY super fund is to save for your retirement.

 

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