The rise and rise of SMSFs

Self-managed superannuation funds (SMSFs) are likely to make up the largest share of the superannuation fund market within the next 15 years, according to ING Australia superannuation strategy manager Graeme Colley.

Colley said Australia’s aging population, the Government’s changes to superannuation policy last year and heightened public awareness of the importance of saving for retirement are probably the biggest drivers of the SMSF sector’s rapid growth over the past 12 years and will continue to drive it going forward.

“To describe the growth of SMSFs as huge is probably an underestimation,” he said.

Colley pointed to data that showed that the total number of SMSFs had more than trebled over the past 12 years to about $350 billion and that total assets had soared from about $30 billion to more than $250 billion over the same period.

He said that while most categories of superannuation funds have decreased in asset size recently, SMSFs and industry funds have “boomed ahead”, with SMSFs attracting by far the largest inflows for the year ended September 2007.

According to Colley, SMSFs are cheaper to set up and run for most clients with balances greater than $200,000 to $250,000, another likely reason for their increased popularity.

According to Colley, SMSFs’ modus operandi has changed somewhat over the past 12 years, with a move away from cash investments.

“It looks like this money has gone towards equities, mainly, and property… Most ING [Super Concepts] clients have something between a balance and growth style portfolio.”

He said ING clients are also investing increasing amounts in managed funds.

ING’s SMSF administration service Super Concepts maintains more than 30,000 SMSFs across Australia with an average balance for accumulation funds of about $1 million and for pension funds of about $1.4 million.