SMSF trustees value benefit retention

Of the many benefits cited with regard to the set-up of a self managed super fund (SMSF), flexibility and control are constantly top of the list. SMSF members are looking for control of their investments, the reduction of their fees and increased returns and, if all goes to plan, taking charge of their own superannuation does exactly that.

But why then do a large number of SMSF members maintain previous account balances with industry or retail funds? Why not consolidate?

For OnePath superannuation strategy manager Graeme Colley, such a decision is not about diversification or reluctance to amalgamate funds but rather a conscious decision to retain the ancillary benefits available within a previous fund.

“The reason why people won’t roll over some of their benefit, not all of it, is basically because of the insurance that might be in the other fund that they’ve been a member of,” he said. “For example, someone might be a member of a retail fund or an industry fund and the life cover that they’ve got in those funds might be pretty good.

“So in that situation, the smart decision, and the one they make, is to leave their money in that because insurance might cost them more in their SMSF.”

Upon retirement, however, Colley said that rollovers were generally inevitable.

“So what we’re finding is that to amalgamate and consolidate benefits, people are rolling over to their SMSF because it allows them to start a pension from that fund,” he said. “And with that in place, they can then do that control thing which is the most important thing about being in a SMSF in the first place.”