Retired SMSF trustees doing well but lack advice
Half of self-managed superannuation funds (SMSF) trustees in pension mode have a financial plan with no more than 70 per cent of that number having a draw-down strategy for retirement.
Yet at the same time more than 90 per cent of trustees were concerned about investment risk, according to survey results released by Vanguard and Rice Warner.
The survey, which interviewed 320 retired SMSF trustees in October 2013 including some Vanguard clients, found that only 54 per cent of respondents had a written financial plan and only 69 per cent of those plans had a draw-down strategy to fund retirement income.
When asked to name an adequate draw-down rate, survey respondents choose between 4 and 8 per cent per year, which conforms to general ranges. However 10 per cent of respondents’ chosen rate would be above what they considered sustainable from their SMSF.
While the survey found that trustees of these funds considered superannuation pensions and non-superannuation investment income as the leading sources of income, there was little interest in annuities with 80 per cent not interested in investing in them.
The survey also showed that retired SMSF trustees had lower allocations to residential and commercial properties than Australian Tax Office statistics indicate for general SMSFs, with the level of gearing of property at 0.7 per cent of asset value being invested.
Investment risk and regulatory change ranked as the two highest areas of concern, with 94 per cent naming investment loss as an area of significant concern while 88 per cent were concerned about the risk of possible changes to superannuation or taxation law.
Rice Warner senior consultant Alun Stevens said that retired SMSF trustees appeared to be happy with what they were doing as well as with their performance, and had a positive outlook for their retirement.
“Interestingly only one respondent nominated longevity as a concern and less than 25 per cent were concerned about their income lasting for life. Larger account balances appear to contribute to the positive outlook.
“Despite concerns about investment risks, there has been a big move from cash to managed funds and direct equities since the last survey. Investors are clearly more comfortable with the markets and keen to grow their assets for the future”.
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