8th Dec 2017
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Super funds in default mode outperform SMSF
Author: Janelle Ward
SMSF and why my balance is zero

If you take a less-than-intense interest in where your superannuation is parked, there is comfort in a new report.

The average default funds are outperforming self-managed super funds (SMSF), according to SuperGuard 360.

In the 12 months to the end of October, SuperGuard 360 found that the average default fund returned 12 per cent, while SMSF returned 10.2 per cent.

Default funds also outperformed SMSF over the past five and 10 years – 9.7 per cent compared with 7.6 per cent per annum over five years, and 4.6 per cent compared with 4.4 per cent for 10 years. 

Over 10 years, the SMSF member would have grown a $100,000 investment into around $154,000 while someone in the average default investment option would have grown a $100,000 investment into around $157,000, the report explains.

The default option is the ready-made investment category for people who make no decision on how their funds should be directed. SMSFs, meanwhile, are set up and run by those who seek more control over their retirement savings.  

I have both – an industry super fund and an SMSF. I set up the SMSF about a year ago. It cost me $1000. I had done my research and decided that was the way to go as I intended to invest in property. I should have done more research than I initially did, as the SMSF is empty and my industry super fund, in balanced mode, is doing well.

I decided not to go down the SMSF road because I wasn’t prepared to commit the necessary time to doing it well enough so it would deliver better returns than my industry fund. In the end, I was honest with myself. Maybe I’m lucky that it only cost me $1000.

What’s your view on an SMSF?

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    COMMENTS

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    BrianP
    12th Dec 2017
    11:46am
    Janelle -

    You are lucky - partly. We had a SMSF and lost nearly all our retirement funds due to no fault of our own. We were ripped off and badly advised by an accountant.

    We say you are partly lucky because you still have to deal with the large costs and sheer mass of red tape rules if and when you want to terminate the SMSF. Just ask an accountant and the auditor their fees to wind up the SMSF and you will get an idea what we mean.

    We are now 64 with no retirement fund left, disabled and with only the age pension to survive on from next year. And we still have a mortgage to pay on a small home which we may not be able to afford. The future is bleak. Without going into too much detail we have been let down by banks and brokers' corruption, accountants giving bad advice to line their own pockets and past superfunds poor performance. A lifetime's hard work has been lost.
    Knows-a-lot
    12th Dec 2017
    11:52am
    I honestly feel sorry for you, Brian. Meanwhile, the fatcats flourish.
    dreamer
    12th Dec 2017
    1:28pm
    Brian i am sorry for you i am in industry myself,last week i listened to the senate and the bull that the LNP came out with was a joke and they must think we are idiots,the greens the next day said you have lost us that was 9 votes and if the super ends up in the LNP hands we will all be lost
    MICK
    12th Dec 2017
    1:46pm
    Sorry you lost your retirement savings Brian.
    If you manage to own your own home and it is not in need of a significant amount of capital to keep it going then you can live well on the pension. I cannot even imagine how losing a lifetime of savings would feel but would not be nice.
    Hope things work out for you. Cheers.
    Adrianus
    16th Dec 2017
    12:20pm
    Not good BrianP, not good mate. I'm guessing your SMSF was managed by your accountant. Unable to work, carrying debt into retirement? I feel for your situation and many others who face something similar. It's only money though, you still have the joy of your family to provide something of much greater value. Merry Xmas.
    Knows-a-lot
    12th Dec 2017
    11:50am
    Superannuation is impenetrable. Too many bullsh*t rules.
    Tib
    12th Dec 2017
    12:48pm
    I want enough money so I don't have to worry about money not a SMSF so I do. Besides industry funds do well and there's an enormous number of people in them and watching them. The financial planning industry are nothing but crooks, I have no doubt they want you to set up a SMSF .... So they can rip you off. My industry fund is one of the biggest in Australia if there are any silly games there will be a lot of angry people. If it's just you no one will care.
    I know there are people here who manage their own funds well , but it's not for me.

    12th Dec 2017
    1:38pm
    But OG gets 15% in his SMSF

    I don’t have an SMSF but my direct share investment portfolio returns about 10% and is more re flexible than suuper as I can withdraw and invest as much as I please

    Just have to watch that damned capital gains tax . But there’s ways around that
    Tib
    12th Dec 2017
    1:48pm
    Raphael I have no doubt youre right. I have always managed money reasonable well. I guess I could run an efficient SMSF. But I have more money than I need. As my father said before he died of cancer , " it's only money".
    MICK
    12th Dec 2017
    1:50pm
    You are doing better than I here. Congratulations.
    What I have learned after 25 years in this game is that it is a tough business and you can lose money much faster than you can make it.
    Capital gains tax? Paying tax on 50% of earnings is still better than trading and paying on 100%. The only way around from what I understand is to offset against losses or get a tax shelter where our PM has his so suck it up or join become another scumbag.
    roy
    12th Dec 2017
    4:31pm
    Ever reliable MICK, has to mention our PM again. Your hatred will be the death of you MICK.
    Old Geezer
    12th Dec 2017
    6:50pm
    Raphael you have got that 15% in my SMSF wrong as it's a tad more than that. Also love trading in SMSF as no tax or CGT either. So when I max out the tax free income in my own name I hit the SMSF instead. Already trading my SMSF and have over half a financial year to go.
    Tib
    12th Dec 2017
    8:51pm
    OG you going to roll over in your grave when you see what they do with your money after your dead. :)
    Rae
    13th Dec 2017
    10:20am
    How long before the realisation that having millions of over 60s paying no tax on income or capital gains is structurally unsound?
    Old Geezer
    13th Dec 2017
    2:09pm
    I agree Rae I worked out the tax I would pay if I earned the same sort of money in a job and there is a big difference in tax. However one just makes hay while the sun shines and has the umbrella ready for stormy weather.
    MICK
    12th Dec 2017
    1:41pm
    Most SMSF is invested in residential real estate from what I hear. Anybody who bought into this sector in the past 10 years has been doing exceptionally well and unlikely any other returns could beat it other than going down to the track and picking the right nag.
    Old Geezer
    12th Dec 2017
    6:51pm
    It's great to have one's home invested in their super fund too.
    Cowboy Jim
    12th Dec 2017
    2:30pm
    Left super when I got to 65, cashed it out. Have a feeling sooner or later the Govt forces
    us to take it out in installments only which then would prevent us from getting the pension. There have been to many changes to super over the last 10 years for my liking
    dreamer
    12th Dec 2017
    4:35pm
    CJ i am 62, I have an appointment in the first week in Jan grab it while you can
    Old Geezer
    12th Dec 2017
    6:42pm
    Man what is this bloke on as he is dreaming by what I have seen in default funds lately.
    *Imagine*
    12th Dec 2017
    7:04pm
    OG you are right, this is absolute rubbish.
    This article has to be another misinformed 'advertorial'.
    I have a SMSF as well as other income and I can categorically state that NOBODY except me and my wife know how well (or poorly) our SMSF has performed up to the end of October this year as the article claims. The ATO take statistics from the SMSF Annual Returns, that was finalised in June 2017. The performance of SMSF will be known again when ATO statistics are released post June 2018. I imagine somebody is talking rubbish here to stir up responses. Our SMSF has returned a modest 7.8% average over 10yrs and that is while drawing a pension from it at a much greater percentage than the minimum drawdown of 5%. SMSFs work for some people but not for those who are not prepared to manage it properly themselves. It always annoys me when I hear the term "SMSF professionals". To me an SMSF is just that, SELF MANAGED - if you need somebody to manage it for you, and that includes blindly following investment advice, then it is the wrong choice - simple.
    Rae
    13th Dec 2017
    10:31am
    Exactly right. And congratulations as 7.8% over ten years isn't at all shabby. You have beaten a fair few professionals and the index assuming some cash and bonds have been held to reduce risk.

    It is when "managers" and "professionals" get involved that dreadful losses of capital can occur.

    Good work taking profits off the table as well in your draw down. No point making money if you can't improve your lifestyle in my opinion.

    I manage my income too but outside super as I simply think the sovereign risk outweighs any taxes I pay. Besides which speculative gains are 50% discounted.
    Old Geezer
    13th Dec 2017
    2:06pm
    I agree Imagine as my SMSF return for 2017 is yet to hit the ATO so how do they know how well it performed.

    I used to do all the accounts and lodge the return for my SMSF myself but auditors were simply charging way too much to audit the accounts. So about 7 years ago I got a call from a lady who had just started doing accounts for SMSFs and got a quote that was very similar to my audit fees and it included the audit as well. I only use her for guidance on what I can do within the fund not what to invest in. If the SMSF loses money then it is my fault not that of any professional.

    My SMSF has now more cash than normal so that may give me a low than normal return for 2018 but that's the price of taking risk off the table.
    Anonymous
    14th Dec 2017
    5:32am
    Shame you missed out on ORG ORI TCL QBE and a host of other great buys in the last 2-6 months
    But yes - I have $200k cash and $750k line of credit in case the market drops and provides another buy opportunity
    Old Geezer
    14th Dec 2017
    9:39am
    Yes made a few bob out of them. Raphael the best buy was BAL as I sold at 100% plus on that one. MND was just as good too. Made a few bob out of lithium and blockchain pennies too.

    Like you I am now holding a lot more cash than I normally do. those line of credits come in handy too.
    Adrianus
    16th Dec 2017
    10:18am
    Absolutely correct Imagine.
    There is another reason why the real return on a SMSF cannot be accurately determined. (Unless of course if we are talking about only funds which are in pension phase, which we are not). It is impossible for the ATO or competitor Super Funds to measure the value of "in house assets" yep they still exist but now at arms length. If an accurate extrapolation were published my best guess would be a doubling of those figures above.
    ex PS
    15th Dec 2017
    4:40pm
    If you want to waste time managing a fund and money paying for audit fees and transaction costs, a SMSF is for you. I looked into that possibility when i first retired and could not see any advantage, now I just look at the fund quarterly to see how it is doing and reset or leave the investment options as I see fit.

    I am retired, why would I want to spend valuable time doing something that has little appeal to me? I have money invested from the sale of a house, that is enough to keep me from getting bored, that account is making about as much as my Industry type Fund is making.
    The day this incompetent government has any control over my retirement fund is the day I draw it out and blow the lot. If my money is going on providing an extravagant lifestyle it will be mine not some shiney arsed banker mate of the coalition.
    Radish
    17th Dec 2017
    12:10pm
    unless you know what you are doing and are confident in your ability to handle a SMSF dont do it.
    I have neither the expertise or want to spend my time every day pouring over my investments in a SMSF. Mine is with an industry fund and I am happy with what has happened with it over the 10 years I have been with them


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