First published in the Financial Review on 31 May 2021
Self-managed super is attracting the interest of those segments of society that have traditionally done poorly for want of control over their finances.
Millennials and women are leading the way in the self-managed superannuation fund sector, the Australian Taxation Office’s (ATO) latest figures show.
Those under 45 years of age now make up about 45 per cent of all new trustees, the March release of the SMSF Quarterly Statistical Report shows.
Furthermore, there are more women in this cohort than men, which was reflected across all age brackets except among baby boomers.
Commenting on the figures, SMSF Association CEO John Maroney says it makes sense to get in as early as possible – provided the sums work out when it comes to the cost of breaking free from a managed fund, in set-up, audit and management fees.
“Most people won’t get into self-managed super funds until they’re in mid-career unless they have accumulated around $200,000 earlier,” says Maroney.
“If people are on a higher-than-average salary and putting in $10,000 or $15,000 a year, it’s going to take them a decade or more to get up to that $200,000 mark so you’re looking really at people being in their 30s before self-managed super funds will probably be cost effective in comparison.
“We would generally say until you get around $200,000, don’t worry too much about a self-managed super fund and just keep saving and once you get around that level, then it’s probably more viable, provided you have the time and expertise.”
Maroney says the crucial first step into the SMSF world is to get good expert advice.
“Getting expert advice in the early stages, is very important to make sure your SMSF has been set up to give you the control you want and you’re doing it in a way that’s not going to come back and haunt you,” he says.
Kylie Wright, wealth management partner at Queensland-based Ulton, says the financial services firm has seen an upsurge in women asking about establishing SMSFs.
“In the recent federal budget there was an emphasis on improving women’s financial position,” says Wright.
“Catch-up concessional contributions are particularly relevant for women aged 25-34 as they on average have 24 per cent less super than men.
“If you are considering an SMSF then get educated and get advice. Like anything, if you can understand the rules then you can successfully operate in the environment.”
SMSFs are not “set and forget”, she says.
“They do need a time and education commitment for you to be successful. Aside from investing, the biggest risk is non-compliance in your super fund. The ATO has stepped up surveillance and penalties on SMSF trustees in the last couple of years and ignorance is no defence. You need to understand the legal responsibilities of being a SMSF trustee.”
Wright has noticed a growing number of her younger clients (under age 35) are being given a leg-up by starting off in their parents’ SMSFs.
“For example, my daughter has been a member of my fund since she was 15, allowing her to participate in non-standard returns from unusual investments she would not have been able to access elsewhere.