ANALYSIS
Continued from previous page
statistically will live longer and therefore will need their retirement savings to last longer. However, we do also have a concern with what appears to be a large tail at the other end of the spectrum, with older males still in SMSFs. For those advising these sectors, there will clearly be a need to provide assistance, support and education to help younger generations come to understand their SMSF responsibilities. However, assistance will also be required for those who are well into retirement with appropriate succession or wind-up strategies for their SMSFs. These statistics clearly paint one story, but the 2020 federal budget also has ramifications for the future of the SMSF industry. It doesn’t take a lot of analysis to note there really weren’t any measures in the budget for SMSFs this year – which in reality is a positive. No changes to the contribution rules. No changes to the taxation of benefits in accumulation or retirement, and just some reconfirmation of delays to the start date of some other previously announced measures, such as increasing the maximum number of permissible members in an SMSF to six. But an analysis kept to this level fails to see the significance of the reforms to MySuper products and what they could potentially mean for SMSFs. An important announcement in the budget was the proposal to ‘staple’ default account arrangements to a member form 1 July 2021. This will have the effect of an individual taking their existing fund with them when they move from one employment arrangement to another. The immediate and clear benefit of this move is to reduce the future instances of lost super, simply on the basis that there will be fewer accounts being opened. More importantly though, as noted in the “Your Future, Your Super” document released by the government on budget night, the Productivity Commission has previously found the incidence of multiple
52 selfmanagedsuper
accounts is leading to Australians losing around $2.8 billion a year in excess fees and lost returns. Imagine if that wasn’t the case? Clearly addressing this issue should lead to a boost in the retirement savings of many Australians. When you consider one of the most important factors in deciding to establish an SMSF is the level of current and projected super savings, measures that should return benefits to a member’s account can only assist in SMSFs becoming a desirable option for more Australians in the future. Add to this the proposed benchmarking approach for MySuper products from 1 July 2021, which is then to be extended to non-MySuper trustee-directed products a year later. Under the proposals, if a super product is deemed to be underperforming its benchmark, the trustees must inform the fund’s members. If a member is told their investment is underperforming, they may take a greater interest in what is actually happening with their super savings. A greater level of interest leads to a greater level of engagement. And SMSF trustees need to be engaged members. Again, this may lead more superannuants to consider if their super needs may be better met
With those under 45 likely to have at least 20 years of their working life ahead of them, it really shows the longevity the SMSF industry has ahead of it.
through the SMSF environment. Of course, increased interest, and possibly demand, for SMSFs from Australians in the future doesn’t mean these types of funds are the right solution for all. SMSF practitioners will still need to use their professional judgment to determine who they believe are the right candidates to run their own super fund, and advise accordingly and appropriately. But there can be no doubt the future for SMSFs is looking bright.
