Should you start your own self-managed super fund?

Noel Whittaker explains how self-managed super funds work.

Should you start your own SMSF?

Managing your own super provides the flexibility to invest in a much wider range of assets. However, as Noel Whittaker explains, there are four major factors that will influence your decision.

Should you stay with your employer’s superannuation fund, join a fund provided by one of the big life institutions, or start your own fund? Just appreciate that it is not as simple as it sounds and that there are three major tasks involved in running your own superannuation fund:

  • administration (doing all the paperwork)
  • investment (deciding where to place the money)
  • insurance (arranging appropriate insurance for members).

This raises the question of who will do all this for you. Certainly, having your own fund provides extra flexibility by enabling you to invest in a much wider range of assets, such as direct shares, debentures, bank bills and property syndicates, but there are four major factors that will influence your decision:

1. The amount of assets the fund will hold. If it does not contain at least $200,000, the setting up costs and the annual expenses are probably not worth the exercise.

2. You must have an occupation that makes it practicable for you to do it. If you work for a major company you may not be allowed to transfer your balance in the employer’s fund to your own fund. And, if your main fund is a defined benefits fund, it would be impossible to transfer your balance because defined benefits funds don’t work like that.

Self-employed people, or those with large amounts rolled over, are best suited to start self-managed funds.

There is no point in having your own self-managed superannuation fund unless you are a “hands on” do it yourself investor. But even then you must consider what would happen if you die and your spouse was left with all the administration.

3. You must have the time and the skill to handle it. This need not be a difficult job if you hire good people to do the work. Your accountant, or super fund administrator, could do all of the all the book work, and if your self-managed fund invests mainly in managed funds, such as share trusts, you and your adviser could decide which funds to use.

4. You must be the type of person who understands the importance of carrying out your legal responsibilities. There are many decent people who run small businesses efficiently but work so hard at their business that they ignore or forget about statutory requirements, such as having meetings and keeping detailed records. If you are like this, and want to run your own superannuation fund, contact a company that specialises in administering self-managed funds to do it all for you. Your accountant or financial adviser will be able to recommend one.

In summary, a self-managed fund may be suitable for high net-worth individuals who want to run their own race and have the skills to do it. However, you should not start your own fund just because the share market is down generally and you believe “I could better myself”. Taking control of the investment decisions of your life savings is a massive responsibility, and making mistakes while learning with your own money could cripple you financially. To run your own fund you need to have a good track record with investing but, even then, you may need to consider what would happen if you became ill and could not make the decisions any more.

Noel Whittaker is the author of Superannuation Made Simple and numerous books on personal finance. His advice is general in nature and readers should seek their own professional advice before making any financial decisions.



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    18th Aug 2017
    Very good comments. Although, having previously worked for the Australian Prudential Regulation Authority, I found that a SMSF is not really cost effective unless the fund contains at least $500k due to administration costs and other expenses.
    18th Aug 2017
    What a lot of rubbish. I have my own SMSF and all the paperwork and compliance reporting is done through ESuperfund. I have had mine for 5 years now and have investments in managed funds Aust Unity, La Trobe, APN and Morningstar. Esuperfund setup a bank account through ANZ and all my incomings go into that account. I can put my money where I like. I still have to complete a Compliance document so Esuper can get all the paperwork ready for the ATO. You do not need in excess of 200,000 that is a myth. As I am over 65 I can use the money in the ANZ account, which I have done new kitchen and bathroom. Try doing that through an industry/retail fund. Go and check out Esupers website they have heaps of info and are aware of all the stuff you can and can't do. The only thing they don't do is advise on investments. But Super funds don't advise either, they don't care where you invest win or lose they still get paid. So get a grip of your finances I did and don't regret it.
    18th Aug 2017
    I agree completely.
    I have already seen this article in a weekend newspaper about 3 months ago and written to Noel Whittaker querying a number of the myths he is perpetuating. I have been with Esuperfund for many years. My only regret is that I did not do it long ago.
    1) If you choose eg Esuperfund, the set up costs for the first year is zero. They then charge $700 per year for the administration at the end of the second year. Which is a gift.
    2) It takes about 8 hours of my time per YEAR to fill in all the details required by Esuperfund. It is getting less and less per year because their client portal is FANTASTIC. If I have any questions their response is detailed and very fast.
    3) The myth that Whittaker is perpetuating about needing $200k is busted completely. He is working on outdated figures that a private accountant would charge for the annual administration. The Esuperfund website has busted that myth with actual examples.
    4) Esuperfund allow the use of any of the normal investment types eg Bank Fixed deposits or Bonds, or share based funds run by other investment experts (eg Montgomery or Perpetual or Platinum).
    5) You DO NOT have to invest directly in the share market if you feel unsure of how to do it.
    6) There is so much information available about how and what to do that I suspect Whittaker has a hidden agenda of discouraging people to take our finances into control so that the financial advisory business can keep on ripping off the public.
    7) The best starting point about getting your funds in order is the Financial Information Service at Centrelink, which is free, unbiased and very, very good.
    8) We had our funds in the Catholic Teachers fund and they took 2 months, and an incorrect rollover cheque to eventually transfer our funds into our own fund. Their excuse at the time was that they were updating their website......yeah right!

    That article is biased, and wrong in may respects.

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