Establishments of self-managed superannuation funds (SMSF) dropped to 0.2 per cent in March 2015 from the previous year on the back of positive super fund performance, according to an Investment Trends and Vanguard report.
The “April 2015 Self-Managed Super Funds Report” found the annualised (net) SMSF establishment of 4.8 per cent rate reached its lowest point in March since the Simpler Super reforms.
Investment Trends head of research, Recep Peker, said establishment was quite closely tied to share market performance.
“One of the main reasons people set up their people set up their SMSF is because they want to run their super themselves because they’re unhappy with how their super fund has been managing their money,” Peker said.
“Within the last two years in 2012 and 2013 you can see that there is significantly fewer number of them setting a SMSF up because of poor super fund performance.”
The report found 8,000 fewer people set up an SMSF in response to poor performance from their existing super fund, and cited more control of investments as the top reason for establishment.
“SMSF establishment tends to increase when super funds are underperforming because people realise how much they’re paying and decide they can do things better. Now that super funds are doing better, more are likely to hold onto their super fund until returns start getting poor again,” Peker said.
“So overall it looks like a slowdown but it’s an outcome of the share market and how the super funds are performing. But interest is still very very high.”
The Australian Prudential Regulation Authority (APRA) said in its quarterly superannuation performance report that APRA-regulated super fund assets grew at 16 per cent to $1.4 trillion, faster than SMSF assets at 10 per cent to 55 billion.
However, Peker noted this disparity was because people using SMSFs are a lot older than people in public super funds.
“40 per cent in SMSFS are already retired and those who aren’t are on average 10 years from retirement. So you’d expect them to have a more conservative asset allocation than all the other people in super funds and growth portfolios,” he said.
“Another reason is because of the under exposure to international assets as well. They have started to recognise this gap and as a result they’re prioritising diversification within their portfolios a lot more.”
