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SMSFs:  Age matters

By Robin Bowerman
Smart Investing
Principal & Head of Retail, Vanguard Investments Australia
14th February 2011

A third of the members of self-managed super funds are age 55-64 – leaving younger age groups well in their wake.

Indeed, the latest ATO’s Self-managed Super Fund Statistical Report shows that more than half of SMSF members are over 55, almost 21 per cent of members being 64-plus. (See the report).

There is a straightforward explanation for the dominance of age 55-plus members in these funds. Often around age 55, many more people entering the final decade or so before retirement begin to think more closely about where they want to place their super in the years leading to retirement and into retirement.

And by age 55, many members’ super balances have grown to the extent that may make a SMSF financially viable, depending upon their circumstances.

As the Australian population continues to swiftly age, many more people will enter the 55-plus age bracket and perhaps contemplate setting up a self-managed fund, rather than remain a member of a big fund.

Expect the competition from the large funds to intensify as they increase their efforts to stop their bigger-balance members being cherry-picked to shift to self-managed funds.

The ultimate beneficiaries, of course, will be fund members. 

Interestingly, Rice Warner Actuaries published its latest Superannuation Projections Report late last year forecasting that the market share of SMSFs would fall from a third of the total assets in superannuation to 22 per cent over the next 15 years.

The forecast, in part, is based on its view that the heavy cutting of the annual contributions cap on concessional contributions will hinder the build-up of big balances in the future, making new SMSFs less feasible than in the past. Further, Rice Warner expects that more SMSFs will close as retired members enter old age.

There are plenty of people in the SMSF industry who do not agree with the Rice Warner forecast and the debate will rage on.







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