The Six Types of Super Funds
There are six choices when it comes to superannuation:
- retirement savings accounts
- industry funds
- commercial funds
- small APRA funds
- self managed funds.
What superannuation fund will be best for you depends on many criteria. One of the main reasons people choose SMSFs is because of the control they are given over their own superannuation destiny.
ASIC has been concerned for some time about the growth of the SMSF sector. It issued two reports in the 2013 year concerning SMSFs. The first questioned the quality of advice that new SMSF trustees receive, and the second looked at the costs of setting up and maintaining an SMSF.
As a part of the second report ASIC issued Consultation Paper 216. What follows is a table from that consultation paper.
Advice on self-managed superannuation funds: Specific disclosure requirements and SMSF costs
Table 3: Summary of Rice Warner’s findings comparing the cost of SMSFs with the cost of APRA-regulated funds.
|Less than $100,000||Are not competitive in comparison to APRA-regulated funds. SMSFs of this size would only
be appropriate if they are expected to grow to a competitive size within a reasonable time.
|$100,000 to $200,000||Can be competitive with more expensive APRA-regulated funds if the trustees undertake the
broader investment and administration functions. For example, SMSFs of this size may be
competitive with more expensive APRA-regulated funds if the trustees outsource transactional
services, but undertake other investment and administration functions themselves.
|$200,000 to $500,000||Can provide equivalent value with APRA-regulated funds provided the trustees undertake
some of the administration.
|$500,000 or more||Can provide equivalent value to APRA-regulated funds on a full service basis.|
The findings of Rice Warner’s study although accurate do not take account of the differences in the administration costs for super fund members in industry funds, commercial funds, and SMSFs when they are in pension phase. Often the administration costs charged to members when they switch to pension phase within industry and commercial funds is much higher than when they are in accumulation phase.
In the final analysis the choice of having an SMSF is a very personal one. If you are ever encouraged to set up an SMSF, with the main criteria for it to buy an investment property, before doing anything you should seek independent professional advice.