Choice to have limited impact on SMSFs

By Mike taylor

New survey data published by the Institute of Chartered Accountants (ICA) has put paid to suggestions that the new choice of superannuation fund will lead to a surge in the establishment of self-managed superannuation funds (SMSFs).

The national survey targeted full-time workers aged over 45 and with a household income of more than $90,000 a year and was aimed at determining attitudes to superannuation choice and the manner in which those attitudes would impact the SMSF market.

The bottom line of the research appears to confirm other data suggesting relatively low churn rates being generated by the implementation of choice.

It found that just 7 per cent of respondents would be likely to seriously consider setting up an SMSF, compared to 27 per cent who had already at some stage considered the SMSF option over the past 12 months.

Perhaps more importantly, the survey showed that while 10 per cent of respondents already had money invested in an SMSF, 47 per cent had not even thought about establishing such a vehicle.

Commenting on the survey outcome, the chief executive of the ICA, Stephen Harrison, said that while superannuation choice might not cause a sudden or dramatic impact on the number of SMSFs, it was clear that the sector would continue to be supported.

“SMSFs are attractive as they offer greater control and flexibility of investments, however they are not cost free and these have to be weighed against the benefits,” he said.

Harrison said that while 2,500 SMSFs were established every month they were best suited to high-net-worth individuals and those who were active in their investment decisions.

He cautioned that managing SMSFs could be problematic with one-third of all SMSFs failing to comply with regulations, putting mum and dad investors at risk of tax penalties or even prosecution.