Setting up a self-managed superannuation fund (SMSF) can be an appealing option for those looking for more control and flexibility over how their retirement savings are invested. The number of SMSFs continues to grow every year with almost 600,000 SMSFs now managing more than $696 billion, according to the latest figures.
An SMSF isn’t for everyone though. If you’re worried about the extra expense, risk and administration involved in running your own SMSF, there’s another option: taking better advantage of your current super fund. The problem is, there’s evidence a lot of people aren’t aware that this is possible.
Different studies show that a substantial number of Australians either don’t know how much money they have in superannuation1, or have failed to consolidate their super accounts2. So it’s logical to assume that many Australian retail or industry super fund members leave their retirement savings in their fund’s default investment option, and don’t realise the different investment choices they have available.
Justin Chandler of Chandler Private Wealth says younger investors tend not to take much interest in their super accounts.
“But as they get older and the account builds up to several hundred thousand dollars, they think, ‘This is my money and I want to work out where it’s invested, what it’s doing and how much I’m paying in fees’,” he says.
Taking more control
“That’s probably the main reason people want to set up SMSFs – they feel like they can control the exact investments or buy some property,” says Chandler.
That being said, depending on the needs of the member, retail and industry super funds can also provide a substantial level of control.
With hundreds of different managed funds available, covering a range of sectors and assets classes, as well as access to shares and even bank term deposits, there are plenty of investment choices in super funds, says Ryan Pickles, Director and Certified Financial Planner at Hamilton Morello.
In fact, it’s wise to check whether you need to move out of the default option and take action to make sure you’re not losing out in the long term, says Pickles, citing the case of a recent client.
“I saw a lady who’d just retired. She was in her fund’s default option, which was 85 per cent in growth [higher risk] and 15 per cent in defensive assets [lower risk]. But it was evident she and her partner were completely risk averse. They didn’t need to take extra risk anyway because her partner had a substantial super balance.
“So, we reduced her growth assets from 85 per cent down to about 10-15 per cent and she still met her goals,” says Pickles.