“The Overview confirms some very interesting macro information,” said Aaron Dunn, Managing Director of The SMSF Academy. “For example, it confirms what the industry has long suspected – that there has been steady growth in the sector, both in the number of funds and also in total super assets. Significantly, there has been a jump in the number of younger people – those in the 35-54 age group – setting up their own funds. This suggests that SMSFs have moved from being a retirement vehicle for baby boomers to a retirement vehicle of choice for people who wish to become more engaged in their superannuation savings.”

Mr Dunn said the Overview also reveals the continued growth in SMSF net flows which includes total contributions and benefit payments. “These statistics support that not only did the Simpler Super reforms provide an incentive to get money into super, but also to take money out – in the form of benefit payments – particularly for those aged over 60,” Mr Dunn said. “This could be also due, in part, to the popularity of transition to retirement strategies.”

However, Mr Dunn said that while the macro information contained in the Overview was useful, in order to better understand all the elements within the SMSF life-cycle, and to aid the SMSF industry’s response to the Stronger Super reforms, the Overview needs to also look at the statistics from a micro level.

“Disappointingly, we see no break down in the contributions, in particular member contributions, that are provided as off-market or in-specie asset transfers. This information is readily available within the SMSF Annual Return,” Mr Dunn said. “Not providing this information hampers the SMSF industry’s ability to put forward a valid argument on the Stronger Super reform recommendation to abolish the off market transfer of listed shares into SMSFs from 1 July 2012.”

Mr Dunn said that the Government has responded to a Cooper Review recommendation to ban off market transfer of listed shares predominantly on hear-say. “It would be valuable to not only look at contributions to SMSFs at a macro-level, but also understand how these contributions got into the fund – for example, as business real property or listed shares transfers.”

Mr Dunn said providing more information on benefit payments and how they are being withdrawn would also help the industry and the Government better understand the direction retirement income stream policy needs to be taken in the future.

“As longevity risk is one of the biggest issues this century, it would be good to be able to identify things such as whether, on average, members are living beyond their means and from that information estimate how long their money will last against their average life expectancy.”

Key Findings from the Overview:

• Only one in every 10 new SMSFs established are within a corporate trustee
• While growing in the area of post-retirement benefits, very few establish funds and commence income streams immediately (only 11%). 49% of funds commencing pensions within 2009, had been in existence for five or more years
• The concept of a ‘family fund’ doesn’t appear to be gaining traction… only 4% of funds have three or four members
• The entry point for SMSFs appears to be dropping. Growth has occurred in all ranges up to $500k. This may be due to performance dissatisfaction as a result of financial markets – historically the number of new SMSFs has grown in poor financial markets Conversely, there has been an asset size decline in member balances >$500k. This will have come about from a variety of reasons including the impact of GFC coupled with an increasing trend in benefit payments
• SMSF trustees appear to have taken an active response to their investment strategy as a result of the GFC, with a move to cash and term deposits. Holding of real property has also grown which would incorporate the law changes to allow limited recourse borrowing from 24 September 2007. It will be interesting to see in future data, when SMSF trustees look to make that shift back into listed equities.

The ATO Statistical Overview 2008-09 is available at the following link http://www.ato.gov.au/corporate/content.aspx?menuid=0&doc=/wp-content/00301485.htm&page=1&H1 More discussion on this topic is available now on Mr Dunn’s blog thedunnthing – www.thedunnthing.com

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