If you’re part of the cricket loving public, you’ve probably been less than satisfied with the way Indian batsman Cheteshwar Pujara has almost single-handedly disarmed our bowling attack and batted for what seems to be eons. It prompted spinner Nathan Lyon to ask him during the Sydney Test match, “Don’t you get bored?”
Well I’d like to pose a similar question to some of the participants in the superannuation industry who feel the need every now and again to come out and claim how bad the SMSF sector is.
The latest critique has come from the Australian Institute of Superannuation Trustees (AIST) with its chief executive claiming in a recent article that half of the existing SMSF members would be better off in larger retirement savings funds.
But let’s think about this for a moment. The AIST represents superannuation fund trustees that are not SMSF trustees. Do you think there is any self-interest involved?
This is exactly the type of comment reported in the consumer media, and accepted by a good portion of the public, that needs some context in relation to the background of the individuals making the comments.
It stands to reason larger superannuation funds are still running scared of SMSFs simply because they are experiencing the most significant form of leakage from their organisations to the SMSF sector. This is evidenced by the large numbers of people nearing or in retirement looking for a better income solution to suit their next stage of life.
The reality is the retirement income solutions offered by public offer funds have been so poor in the past the government and Treasury are looking to implement a compulsory standard initiative called comprehensive income products for retirement.
So, if individuals decide they can put together a better solution for their own retirement via an SMSF, that presents a very significant threat to the AIST and its members’ funds under management.
Of course, they will do everything within their power to stop this leakage and voila, another negative piece about SMSFs is penned.
When these arguments and opinions surface you’ll always see statistics trotted out proving low-balance SMSFs are inefficient and are not working in the person’s best interest.
A while ago, the Australian Securities and Investments Commission suggested an SMSF should not be established by anyone with a retirement savings balance of under $200,000. More recently, the Productivity Commission handed down what most industry participants felt was a fairly ridiculous notion that only an SMSF with $1 million of assets could be efficient and competitive for its members.
However, there is a flipside to this argument. Let’s say we concede these are sensible thresholds to which we should adhere. If so, it stands to reason then that any existing public offer fund members with balances over $200,000 (or $1 million) should be recommended to set up an SMSF. If this were to happen, it would then possibly demonstrate some actions can be taken that are devoid of self-interest and bias.
Sadly, I am yet to hear of a case where an adviser from a public offer fund has suggested a member start an SMSF because their asset balance has reached the required efficiency and performance threshold.
And I would not advise holding your breath waiting for one.