SMSFs have dismal returns: ISA

Self-managed superannuation funds (SMSFs) with less than $2 million in assets are unviable as a retirement savings vehicle, Industry Super Australia (ISA) believes.

ISA analysis found that SMSFs with less than $2 million were likely to have performed well below its Australian Prudential Regulation Authority (APRA) regulated counterparts and that the average net return for an SMSF (with fewer than four members) in 2015 was 6.2 per cent.

ISA said this compared with 8.8 per cent for APRA regulated funds – 7.8 per cent for retail funds, and 9.7 per cent for an industry fund.

The analysis also found SMSFs with fewer assets performed significantly worse than those with more assets, and returns ranged from -16.9 per cent for funds with less than $50,000 in assets to 7.7 per cent for funds with over $2 million.

VIEW ALL

View all

ISA said more than 80 per cent of SMSFs were of a scale that was likely to result in sub-standard performance.

ISA chief economist, Stephen Anthony, said: “The best performing SMSFs will have a diverse portfolio of assets, and scale to drive costs down; for most people this is aspirational”.

“We share the view that SMSF sector growth is being driven by sales efforts. It’s important that consumers look at the returns and fully understand what they’re signing up to,” he said.