I was really worried after reading a recent article in the Australian Financial Review by Sally Patten regarding how members are continuing to reduce the amount of voluntary contributions that they are making to their Industry and Retail superannuation.
Super savers abandoning big funds
21 July 2012 | Sally Patten, The Australian Financial Review, pg 1
"Investors are dramatically reducing their voluntary contributions to superannuation funds after five years of dismal returns and constant changes to super rules by the federal government. Disenchanted members are shunning large pooled funds and moving into self-managed schemes, where they have greater control over their investments and can diversify into assets such as direct property."
Whilst the reasons for this shift are perfectly understandable; what with global investment markets in turmoil and a lack of viable alternatives offered by industry and retail superannuation providers, it comes as no surprise that we are all abandoning traditional superannuation as the best method of funding our retirement. My concern is that if we don’t embrace a solution (and fast) ultimately it’s our own living standard in retirement that will suffer.
As evidence of this, a recent Russell Investments survey revealed that Australians believe that will need a lump sum of approx. $750,000 in retirement to be able to enjoy the lifestyle they want, but they have lost faith in superannuation as the best vehicle to provide this. We Aussies typically love the power of property and believe that an investment property or two is the best way to supplement whatever balance we end up with in our superannuation.
Of course, Industry and Retail super continue to argue that in the broad scheme of things the current market turmoil is just a blip and that we should all just “hang in there” and wait for the market to recover. Furthermore they hold the view that property will deliver no better future returns than their investment offerings. Maybe they’ll be proved right in the long term, but it seems we’re all sick of waiting and our patience has run out.
I think it’s really important to remind ourselves that superannuation is not an investment. It is just a blank tax structure that receives generous tax concessions in return for holding our funds in trust until we retire. If we really think about this, surely we need to ask our superannuation funds, “Why can’t I use my superannuation balance to purchase my next investment property?” Their answer usually has something to do with their trustees believing that it’s not in their member’s best interests etc, etc, etc. Most of us are starting to question whose interests they are really serving, theirs or ours?
In fact you CAN buy your next investment property with your superannuation by establishing a Self Managed Superannuation Fund. According to The Russell Investments survey 1 in 10 Australians are considering starting a Self Managed Superannuation Fund. I suspect the reason is twofold – individual investment choice (including direct property) and ultimate control. Two very powerful reasons indeed. So perhaps I shouldn’t be worried after all. The growth of the Self Managed Super sector must reassure me that Australian’s retirements won’t be so lousy after all. In fact the superannuation system is stronger than ever and in the safest hands of all… Your Own!
Are you thinking about establishing a SMSF and need some more information or interested in transferring your SMSF to Exelsuper? Please feel free to Contact Us if you have any questions.
Chris Harris
