2014 is likely to be another milestone for the superannuation industry, with forecasters expecting self managed super funds to account for one third of all Australian superannuation assets. Self managed superannuation is not suitable for everyone, so why does it remain a major market growth sector? Below are some advantages that have led to the continued uptake by newcomers of self managed super funds.
Keeping it in the family: With self managed superannuation, the entire family can pool their assets in one purpose built fund. Advantages include estate planning tailored in a unified yet flexible family-centric approach. Accumulated family assets greatly increase the potential for multi-generational wealth creation.
Control of investments: Flexibility is a key component of modern investing. Self managed superannuation funds offer control, adaptation and immediacy, beginning with a trust deed exactingly drafted to desired specifications. The result is a flexible approach toward planning of investments. Administration is easily overseen by companies such as Clime, allowing self managed investors time to focus on core strategies.
Savings: Self managed superannuation requires set-up costs plus annual fixed costs. A small fund would not be cost effective due to ongoing costs unless significant contributions to the fund are forthcoming. An asset base of more than $200,000 will begin to improve cost effectiveness in comparison to outsourced superannuation management, although professional guidance is recommended. An increase in fund balance will free up a greater proportion of accumulated wealth that can be directed toward shares, property, term deposits and a number of other investment options.
Choices: In comparison to ordinary superannuation funds, self managed funds offer greater opportunity for a diverse investment portfolio. From property, equities, overseas assets and even artwork, self managed super funds enable investment preferences suited to individual choices. The framework of a fund’s documented investment strategy can facilitate almost unlimited asset choices.
Taxation benefits: Many people are drawn to self managed super funds due to taxation laws that reduce the fund’s tax liability. The accumulation phase incurs a maximum 10% tax, with no tax on capital gains during the pension phase. Estate planning can be tax-effective when self managed, and include payments to beneficiaries.
Long-term planning: Often, superannuation funds don’t allow income payments from the fund. Self managed funds are an exception, with the added attraction of operating right through accumulation and into retirement. This consistency and transparency is an appealing long-term planning strategy for many people.
Relaxed reporting requirements: The introduction of self managed superannuation funds was structured with regular Australians in mind. Less stringent obligations, annual deadlines and member reporting are tailored to suit self managed funds, regardless of whether the reporting is managed by an individual or by a superannuation specialist such as Clime. The concessions applied by the Australian Tax Office greatly facilitate self managed funds.
Be the architect of your own destiny: Most people like to have some control over their savings, and superannuation is no exception. Rapid advances in technology plus the ability to remain updated has facilitated a new breed of savvy investors keen to make the most out of their financial portfolio. Individual and collective options for self managed super funds are almost limitless.