Smart Investing
-
The Federal Budget’s confirmation that the annual cap on concessional superannuation contributions for all fund members over 50 will halve to $25,000 from the 2012-13 financial year, has some investment commentators envisaging that more investors will turn to negative gearing.
-
We've been told by the financial community at large that it's a tough time to be an investor. The financial markets are extremely volatile. Bond yields are near historic lows. The outlook is uncertain.
-
The latest bouts of sharemarket volatility and this month’s cut in official interest rates once again highlight the crucial role of bonds in a properly diversified investment portfolio.
-
Self-managed super funds typically have a much high exposure to cash than fixed interest.
-
The Australian superannuation industry reverted this week to its unwanted status as one of the government’s favourite Budget ‘hollow logs,’ with billions of dollars in savings extracted from the system by reneging on a tax break meant to encourage higher retirement savings, and a doubling of the concessional tax rate on the super contributions of those earning more than $300,000.
-
- Podcasts
News & Commentary
Paradoxical future for SMSFs 14 Dec 11
The self-managed super fund sector faces a rather paradoxical future: Continued success in attracting big dollars yet the prospect of a very slight loss of market share.
This is how the influential Superannuation Market Projections Report 2011, published late last week by actuaries and superannuation consultants Rice Warner, forecasts the road ahead for SMSFs.
If Rice Warner is making a correct call, there are two sides to the future of self-managed funds.
On one side, the researchers expect the Future of Financial Advice reforms to encourage financial planners and accountants to focus more on SMSFs in an effort to maintain their revenue. And, in turn, this should lead to more money flowing into the sector than had been forecast in last year’s Superannuation Market Projections Report.
However on the other side, Rice Warner expects SMSFs’ share of the post-retirement market will markedly reduce over the next 15 years. This is mainly because these funds have a dominant share of retiree dollars and will therefore have the biggest withdrawals of pension benefits as Australia’s population ages.
Today, according to the report, the SMSF sector holds 31.2 per cent of the overall (accumulation and retirement) super dollars, a total of $420.6 billion. And this is projected to rise to $980.67 billion over the next 15 years in 2011 dollars, making a market share of 30.4 per cent.
One of the more interesting statistics is that SMSFs are estimated to currently hold than half of the post-retirement dollars, but Rice Warner expects this to slip to 42 per cent over the next 15 years. Of course, self-managed super’s share of post-retirement superannuation dollars will still remain much more than any other super fund sector.
What do these forecasts mean to you as an individual super fund member?
One is that you can expect more advisers to highlight the attributes of SMSFs – particularly if you are over about 45 with a reasonably high super balance. Given the increased likelihood that an adviser will suggest that you establish your own fund, it may be worth thinking about whether or not a self-managed fund is appropriate in your circumstances.
It is clear that many SMSF members believe the funds give them a desired degree of control over investments, tax, estate planning, asset protection and so forth. However, a proportion of SMSF members do not have the skills and/or time to look after their own funds but are unwilling to gain adequate professional guidance.
Another broader issue is making a decision, depending upon your age, about whether you are going to remain with your existing super fund in retirement or rollover to another fund.
Industry funds, for instance, are increasingly making a significant effort to keep members for life – and are thus expected to markedly lift their share of super retirement dollars from a relatively low base.
Welcome to the future. Be ready for it.
* Written by Robin Bowerman, Principal, Corporate Affairs & Market Development at Vanguard Investments Australia.
To receive this column by email each week, register with Smart Investing™.
What can I do next?
- See Prices & Performance data for Vanguard funds
- Learn more about our Managed Funds up to $500,000
- Learn about our Managed Funds over $500,000
- Discover our Exchange Traded Funds
- Download a 2011 Index Chart
- Contact Client Services
