11
Oct

ASIC urges consumers to question whether SMSFs are right for them

ASIC has warned Australian investors considering establishing their own self-managed superannuation fund (SMSF) to be particularly aware of the potential downside to such a strategy, and that many Australians set up SMSFs that are inappropriate for their circumstances.

ASIC has identified eight ‘red flag’ situations which, together or in part, would make it extremely unlikely for an investor to gain any advantage from using SMSFs to create and safeguard their intended retirement lifestyle.

Australian Tax Office figures reveal that as at 30 June 2019, there were 599,678 SMSFs in Australia holding nearly $748 billion in assets, making total assets held in SMSFs larger than those in either industry ($719 billion) or retail ($626 billion) funds.

There is a clear correlation between the size of an SMSF and the returns enjoyed by members. The Productivity Commission, in its report on Superannuation: Assessing efficiency and competitiveness identified that SMSFs with balances below $500,000 produce lower returns on average, after expenses and tax, when compared to industry and retail super funds.

ASIC’s research also found that SMSFs are not an appropriate investment option for people who want a simple superannuation solution, particularly if they have a low level of financial literacy or limited time to manage their own financial affairs. On average, SMSF trustees spend more than 100 hours a year managing their SMSF.

Read the media release here.