Centric Wealth today said the burden on self managed super investors was becoming unwieldy and leaving many at risk of being underinsured.
According to Centric Wealth, one of Australia’s leading financial advisory firms, a constantly changing regulatory landscape means it is now more important than ever for SMSF trustees to seek professional help to better manage and protect their funds.
Natasha Panagis, Centric Wealth Technical Specialist, says it is becoming more and more difficult for SMSF trustees to meet all of their legislative and compliance requirements.
“Take for example the latest changes that came into effect on 7 August this year, which require all trustees and directors of SMSFs to consider providing insurance to their members as part of the fund’s overall investment strategy. We think it would be very difficult for most Australians to understand the full scope of their insurance requirements without some sort of formal training,” she said.
“Although this change is mandatory, it is up to the trustees to determine the appropriate type and level of insurance cover they should offer to members, whether inside or outside of their SMSF.”
“Whilst members of larger super funds are often provided with some form of automatic death and total permanent disability insurance cover, automatic cover is generally not provided by most SMSFs. Indeed, recent Federal Government figures indicate that only 13 per cent of SMSFs have some form of insurance,” Ms Panagis said.
“We certainly recommend an adequate level of insurance to all our clients so their families can remain financially secure in the event of the main income earner passing away or having a major accident which prevents them from returning to work in the future.”
Ms Panagis said the risks of not having insurance cover can certainly be significant, particularly given the recent surge in SMSFs accessing loans to buy investment property.
“Where trustees have borrowed money to buy property, not having life and total permanent disability cover can become a major problem if one of the members passes away unexpectedly or becomes disabled and can no longer contribute into super. The key risk here is that the SMSF will go into negative cash flow, which could be exacerbated if there are existing debt arrangements in place,” she said.
“Trustees should also consider obtaining general insurance cover such as rent protection insurance in order to safeguard their hard earned retirement savings”.
