ANALYSIS
A new cost perspective
Individuals who opt for an SMSF do so for many and varied reasons. Per Amundsen analyses why they now have the added comfort of knowing these retirement savings structures are also actually cost-effective.
PER AMUNDSEN is head of research at Thinktank.
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At 30 June 2015, ATO figures showed there were 533,839 SMSFs. Five years later, at 30 June 2020, that figure stood at 593,375 – a gain of 11.1 per cent. After exponential growth post the global financial crisis (GFC), the rate of increase of those choosing to personally manage their superannuation had fallen back to a more moderate pace. The slowing growth rate encouraged critics of this super sector to suggest SMSFs were in decline – perhaps even terminal decline. In particular, they pointed to the 2018 and 2019 financial years when the increases were a small 1266 and 4694, respectively, to bolster their case. In 2020, that argument lost some of its validity when the increase in the number of SMSFs was 18,540, illustrating their ongoing attraction. Anecdotal evidence for 2021
suggests another solid gain, highlighting, yet again, an economic crisis does not deter individuals from setting up an SMSF. Quite the contrary. The simple truth is a significant minority of those with superannuation balances, either in accumulation or retirement phase, want to take personal control of their retirement income strategy. Most appreciate this control comes at a price, that is, they must invest time and effort, especially if they choose not to use specialist advice. But it’s a price they are prepared to pay, even in the face of ongoing criticism that they would be better served by putting their superannuation with Australian Prudential Regulation Authority (APRA)-regulated funds. No less a body than the Productivity Commission, in its final report into superannuation issued in January 2019, said an SMSF needed a balance of $500,000 to be cost-competitive with APRA-regulated funds. In its draft report, it put that figure at $1 million, but retreated when it became apparent that number could not be justified. The Australian Securities and Investments Commission (ASIC) also got into the debate with its
