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Spoiled for Choice

Australians really do live in the lucky country.  Particularly when it comes to the choices we have for our superannuation savings, writes Terri Loy

Since 1992, Australian employers have been legally required to invest in superannuation on behalf of employees.  From 2005, Australian employees have been able to choose their own superannuation fund for their retirement savings.

For many Australians, apart from their homes, superannuation will become their largest asset.

According to statistics there is approximately $1.40 trillion invested in the superannuation environment as at 30 June 2012 (source:, June 2012 Quarterly Superannuation Performance report, 23 August 2012).  This money is spread over various superannuation sectors including Retail, Public, Industry, Corporate and Self Managed Superannuation Funds (SMSFs).

The majority of assets invested within the superannuation environment are controlled by professional managers in the Retail or Industry funds sectors.  Interestingly, it is the Self Managed Superannuation sector that has been the fastest growing sector, currently holding approximately one-third of the total amount invested in superannuation.  As at 30 June 2012, there were just over 478,000 SMSFs in Australia with approximately 25,000 new SMSFs being established each year.  (Source: – SMSF Statistical Report June ’12.)

The primary motivation for this growth has been the desire by individuals to have more control over their superannuation.  While other sectors allow a certain level of investment choice, generally speaking, fund members in retail, corporate or industry super funds have very little control over how their money is invested.  Consequently, more and more people are realising the advantages of making their own investment decisions and taking control of their own retirement strategy.

This control over investment decisions has helped SMSF trustees navigate reasonably well through the uncertain market conditions we have experienced over the past few years.  According to the Australian Tax Office (ATO), as at 30 June 2012 SMSF portfolios were largely invested in either cash & term deposits or listed Australian shares, with approximately 30% exposure respectively (see Chart A – Asset Allocation graph).

It could be inferred that trustees are being cautious with their SMSF investment strategies at the moment while also taking advantage of market opportunities as they arise.  This flexibility with an investment strategy may not be as readily available from other superannuation sectors.

Control and involvement are very good reasons for establishing an SMSF, however, individuals should also consider other factors when deciding if it is the most appropriate vehicle.  The decision to run your own fund must not be taken lightly and involves serious responsibilities; as trustees of your own super fund you need to understand the rules and regulations, including knowing what you can or can’t do in relation to investing in certain assets.  Maintaining an SMSF for the provision of retirement benefits for members must be the primary consideration underlying all investment decisions made by trustees.

Amended regulations means the ATO will now have more power to wield the penalty stick if SMSF trustees do not adhere to the rules.  And further reforms to the superannuation sector means additional obligations will be imposed on super fund trustees to consider insurance for their members as part of the investment strategy, to ensure super fund assets are kept separate from personal assets and to value super assets at market value for reporting purposes each year.

If you are not prepared to take on the responsibility of running your own fund within the guidelines set out under superannuation law, then you should choose a professional manager in the Retail or Industry sector who can manage your super for you.

The beauty of our superannuation system is the choice we have to select a vehicle that best suits our own personal needs.


This article was written by RBS Morgans Limited A.B.N. 46 010 669 726  AFSL 235410  A Participant of ASX Group and a Professional Partner of the Financial Planning Association of Australia. While it is based on information from sources which RBS Morgans considers reliable, its accuracy and completeness cannot be guaranteed. Any opinions expressed reflect RBS Morgans judgment at this date and are subject to change. RBS Morgans has no obligation to provide revised assessments in the event of changed circumstances. RBS Morgans, its directors and employees do not accept any liability for the results of any actions taken or not taken on the basis o f information in this report, or for any negligent misstatements, errors or omissions. The information in this article is general advice and takes no consideration of any specific person’s investment objectives, financial situation or needs. Those acting upon such information without first consulting an investment advisor do so entirely at their own risk. It is recommended that any persons who wish to act upon this report consult with an investment advisor before doing so. This article does not constitute an offer or invitation to purchase any securities and should not be relied upon in connection with any contract or commitment whatsoever.

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Alana Lowes

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