Editorial - Superannuation e-news March 2008

SMSFs are the notable exclusion from the government’s list of permissible vehicles nominated as First Home Saver Accounts. Why? Typically one would think they are ideally suited to mum & dad funds holding an offspring's FHSA saving, but not where the SMSF was set up solely to accept such savings as that would be unviable.

On the other hand the sheer growth in the number of SMSFs speaks volumes for the popularity of a structure that is used by many to save for retirement. Not only have we seen a steady increase in their number but at 30 June 2007 the average fund held around $800,000. With over 360,000 funds in place the community is obviously voting with its feet and so long as the SMSF proposition is attractive this trend should continue. The alternatives need to be much better before the tide will turn in their favor.

A core appeal for many trustees is the control that the SMSF structure allows and while a SMSF is not suited to everyone, obviously there is considerable appeal out there and this is reflected in the product’s up-take. Conceptually SMSFs also fit the broader contemporary trends in society with individuals being encouraged to take charge of their life and to benefit from their decisions. We are generally better educated, wealthier, bolder, greater risk takers and probably better able to deal with more complex issues than previously. We are now better at making choices with experience in issues of health, education, utilities and inevitably how we plan our finances. We are worldlier when it comes to decision making and more up-front when we seek professional assistance, obtaining it when necessary but choosing to go it alone when we have the relevant skills ourselves - and that's how it should be!

With current incentives to save in superannuation it is not surprising that many are drawn to SMSFs. They are increasingly the preferred option for those with significant account balances and those who want control and a say in how their retirement savings are invested. There are also potential cost savings, flexibility, estate planning and other benefits. Some also relish the opportunity of better acquainting themselves with the benefits available from superannuation. In general we see a high standard of trustee behaviour for which the regulator must also get credit as it has invested much to encourage good behaviour.

In some of the press coverage on SMSFs we get a sense of something unsavory about them and that their activities aught to be curtailed. An increasingly shrill criticism of their strategies, their excess numbers, poor asset allocations, the apparent non-viability of funds under $300,000 and the incompetence of trustees at best or major conflict of interest of accountants setting up funds with the sole intention of duping unsuspecting trustees and simply creating future income streams for themselves tests credibility and begs the question of an underlying agenda? When the stock market retreats SMSFs are singled out as being the sector that will be most affected. Apparently SMSFs cannot put a foot right, yet their popularity has never been higher! There may be a very few bad apples in the SMSF universe and Superannuation Australia would support ways to weed them out including all reasonable legal action by the regulator, but to tar trustees generally with a cavalier brush in respect of their responsibilities is quite unhelpful.