How ‘self managed’ are Self Managed Superannuation Funds?

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With the 2010 superannuation peak ‘season’ now passed it’s tempting for many Australians to disengage from their super until next June or at least until they get their next fund statement.  The detachment of Australians from their retirement savings is well documented – particularly in younger groups of workers. This begs the question of what might help to engage people more actively in saving for their retirement?

As a strong supporter of the use of Self Managed Superannuation Funds where appropriate I’ve long been of the view that the very words ‘Self Managed’ are a misnomer.  I suspect the absolute majority of SMSFs in operation are not ‘self managed’ in every sense of the words.  These funds are more appropriately titled ‘Private Superannuation Funds’ and the government would do well to look at ‘what’s in a name’ when it next reviews superannuation.  I suspect the words ‘Self Managed’ (or Do it Yourself) and the associated accounting and compliance costs are a deterrent to many people who might otherwise be interested in having a greater level of engagement and decision making with their superannuation.

While ‘appropriate’ relates to the minimum level of assets in a private fund (to justify the annual accounting and audit costs) the basic laws of economics dictates that increased demand which is met by supply will see such costs fall, relatively speaking, and a broadening of the ‘appropriateness’ of private (SMSF) funds.  Increased participation in private (SMSF) funds suggests an eventual growth in specialist accounting service providers which can extract profit from increased scale.

The proliferation in private super funds (SMSFs) continues for a range of reasons but the point is that the proliferation exhibits an increased level of engagement in retirement planning by people who establish such funds.  This in itself is a good thing –  a workforce more engaged in their retirement planning suggests people will be more attune to issues around adequacy.

The government should recognise the blatantly obvious fact that SMSFs are not ‘self managed’ and consider a name change to ‘Private Superannuation Funds’ and openly encourage more Australians to engage with saving for their retirement.

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