We all know that old saying, “lies, dammed lies and statistics”. Well, for once, I’m more than happy to take a set of statistics at face value – and for a very obvious reason. The latest set of Australian Taxation Office statistics on self-managed super funds (SMSFs), which were published in the report titled Self-managed super funds: A statistical overview 2013-14, could not have been more flattering of the sector. It painted a picture of solid growth, competitive returns when compared with the APRA-regulated funds, and, significantly, an influx of younger people with the median age of trustees dropping below 50 for the first time.
To take that latter statistic first, it is excellent news that younger people are taking up SMSFs. Although there will inevitably been some cynics who will suggest they are putting their retirement savings at risk by leaving the APRA-regulated system, I take the view that they want to get more involved with their superannuation and, as such, are more likely to achieve their desired outcome. People who are now in their 30s and 40s fully understand that they are likely to be living into their 90s, and, assuming the retirement age remains at 65, will have to generate a superannuation pool that will allow them to have an income they can live on for 25 years or more. It’s a sobering thought and I would have thought the fact these people are thinking about it is something our policy makers should encourage. After all, the primary goal of our compulsory superannuation system is for people to be self-sufficient, and that’s exactly what they are trying to achieve.
Important as the falling median age of trustees is, in my opinion it’s not the most significant finding to come from these statistics. Rather, it’s the ATO’s observation that trustees are proving more than adept are handling volatile investment markets that is really noteworthy. To quote the report: “The continuing strength and community confidence in the SMSF sector is demonstrated by positive shifts in SMSF numbers, total assets and member account balances over the five years to 2014. “Changes in the composition of SMSF asset portfolios show the ability of SMSFs to adjust to changing circumstances and economic conditions.” [In the 12 months to 30 June 2014, SMSFs, on average, returned 9.8% and for the past five years showed positive returns.]
Let’s digest the second sentence of that quote – SMSFs are demonstrating the ability “to adjust to changing circumstances and economic conditions”. Those words of wisdom come hard on the heels of a recent report by the online broking house Commsec showing trustees taking advantage of the opportunity to buy equities during a downturn in the Australian equity market last year. That’s right, buyers, not sellers, in a falling share market. So much for the opinion of the “experts” from the top end of town who have constantly maintained that trustees lack the knowledge and experience to make their own investment decisions. I have never believed this, and now the evidence is bearing it out. There’s two factors at play here. First and foremost the vast majority of trustees are professionals, self-employed, small business people or work the land. They are used to making decisions, sometimes difficult ones, and can transfer that ability to investment markets. In other words, they are not daunted by the vagaries of the market; indeed, the clients I speak to enjoy the challenge. Second, the SMSF market is increasingly being filled with specialists who trustees are turning to for advice. There’s no doubting the quality of specialist advice that is growing apace to meet a market need, and the fact trustees are both seeking and heeding that advice helps explain why SMSFs are keeping afloat during these turbulent times.
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