SMSFs to prosper despite Budget

Self-managed superannuation funds (SMSFs) are destined to remain a powerful competitor for those regulated by the Australian Prudential Regulation Authority (APRA), notwithstanding the measures announced in the Budget, according to actuarial research house, Rice Warner.

The Rice Warner analysis argues that the SMSF sector's market share and assets under management are likely to emerge relatively unscathed from the Budget process irrespective of the measures directly aimed at wealthier, big balance fund members.

It said the extremely high proportion of SMSF assets in retirement assets together with older membership demographics would serve to mute the Budget's possible negative impact on the sector's market share for the next few years.

"Many of the funds in the retirement phase would have already reached their peak size and are drawing down to pay pensions to fully retired members," it said.

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The analysis said the SMSF sector would move to a position where drawdowns exceeded contributions sooner than other sectors.

However it said that, in sheer dollar terms, Rice Warner expected the SMSF sector to grow strongly over the long term, reaching more than a $1 trillion in retirement assets (2015 dollars) within 15 years.

"SMSFs will remain a powerful competitor for APRA-regulated funds, particularly for older members nearing retirement who generally have higher account balances," the Rice Warner analysis said.

"A critical competitive advantage of SMSFs is the high level of member engagement in superannuation; that's why the funds were established in the first place."

It said allowing large funds to offer joint accounts to members in a marital relationship should be an effective, low-cost way to improve member engagement and to reduce the flow to existing proxy joint accounts, namely the vast majority of SMSFs.