Why Self Managed Super

We believe that a Self Managed Superannuation Fund (“SMSF”) is philosophically the correct form of retirement saving. This is based on the fact that an SMSF gives you personal title over your superannuation assets and, as a corollary, ownership and control over your wealth.

We contest having ownership and control over your superannuation is essential to the desire to embrace it. And, embracing saving through superannuation is one of the smartest ways to maximise wealth. For example, let’s consider our tax regime. It is generally acknowledged that our level of taxation is one of the biggest impediments to wealth accumulation. By embracing wealth accumulation through an SMSF, you not only address the tax impediment to wealth - superannuation enjoys a tax rate of 15% in the savings phase and 0% in the pension phase - but you also do it without foregoing ownership and control over your assets!

Another reason why an SMSF is an intelligent choice is that it offers technical advantages over other forms of superannuation. These advantages can be found in the areas of estate planning, benefit payment and design, and investment management.

An SMSF is the only way to achieve an adaptable personally tailored superannuation solution!

Recent research on SMSF’s shows some interesting facts, none of which is a surprise, but which reinforces our views.

REPORT ON SMSF INVESTMENT BEHAVIOUR

Obtaining greater control over superannuation investments is the main motivator for setting up a self-managed superannuation fund (SMSF), according to a research report released by AMP Capital Investors.

The report, produced by Investment Trends, investigated the characteristics, motivations and behaviours of 575 SMSF trustees, noting that SMSFs are the second largest superannuation segment with $140bn in superannuation assets, representing 300,000 SMSFs with some 550,000 members/trustees.

The report suggested that the role of managed funds is more important than previously believed, particularly to access investment opportunities investors are otherwise unable to reach themselves.

REASONS FOR SETTING UP SMSF

The main reasons given for setting up a SMSF were:
* 55% - more control over investments;
* 36% - poor performance of other super funds;
* 33% - advice from accountant;
* 29% - advice from financial planner;
* 24% - save money on fees;
* 21% - wider range of investments to choose from;
* 20% - saw what existing super funds were charging; and
* 19% - tax planning.

The report claims that the willingness to use managed funds reflects the fact that only 24% of SMSF trustees set up their fund to save money on fees. However, the importance of super fees is still apparent from the findings, given that a number of the main reasons can be attributed to fee/cost issues, eg poor performance (36%), save on fees (24%) and what existing super funds were charging (20%).

SMSF ASSET ALLOCATIONS

The research found that, as at December 2004, asset allocations for the SMSFs surveyed were:
* 34% - listed shares;
* 25% - direct property;
* 23% - managed funds (including listed property trusts and listed investment capital);
* 13% - cash (including term deposits); and
* 6% - other.
The report found that most SMSFs distribute their money across a range of asset classes, contrary to the ATO data suggesting 24% of SMSF assets were held in cash. Only 11% of surveyed SMSFs used a single asset class for their investments, which is lower than previously reported. Asset class diversification also improved with fund asset size. This data reconciled the ATO's asset allocation figures from SMSF's tax returns for June 2002.

INVESTMENT CONSIDERATIONS

SMSF trustees also indicated that when making investments they look for:
* capital growth (70%);
* franked dividends (37%);
* high income (28%);
* income with capital protection (28%);
* security/low risk (24%);
* investment needs minimal attention (18%); and
* simple to understand (13%).

OTHER FINDINGS

Other key findings of the research include:
* 28% of SMSF members are over age 55;
* 15% are already retired;
* 38% of working SMSF trustees describe themselves as business owners/self employed, 6% are professionals (accountants, lawyers, doctors etc) and 8% are managers;
* 29% earn more than $80,000pa and 55% own their own home outright;
* 40% intend to pay their pension from their SMSF, while 42% have not yet considered the issue; and
* only 6% intend to stop using their SMSF on retirement.

Source: AMP Capital Investors media release, 23 March 2005