Self-Managed Super hits a high note
New Self-Managed Superannuation Funds (SMSF) are springing up at a record rate, but the growth is coming from a new and unexpected area.
Self-Managed Superannuation Funds assets reached a record high of $892 billion in March quarter of 2022, and the number of funds rose to a record level as more people use their SMSF to buy property and save for their retirement.
The Australian Prudential Regulation Authority's (APRA) Quarterly Superannuation Performance Publication and Quarterly MySuper Statistics report reveals SMSF assets jumped 12 per cent to $892.0 billion at the end of the March 2022 quarter, up from $796.1 billion a year earlier. That exceeded the growth in MySuper products, which rose to $927.9 billion, up 10.4 cent from $840.5 billion.
Superannuation assets now total over $3.4 trillion, increasing 9.7 per cent over the year (before markets fell in May and June), reflecting strong investment performance and positive contributions growth due to COVID-19 stimulus measures. SMSF assets jumped the most, up 12 per cent from a year earlier, as the table below shows
| March '21 | March '22 | Change | |
| Total Super Assets | $3,136.2 b | $3,441.5 b | +9.7% |
| Total APRA-Regulated Assets | $2,131.9 b | $2,337.2 b | +9.6% |
| of which: Total Assets in MySuper products | $840.5 b | $927.9 b | +10.4% |
| Total SMSF Assets | $796.1 b | $892.0 b | +12.0% |
| Exempt Public Sector Super Schemes Assets | $157.6 b | $161.8 b | +2.7% |
| Balance of Life Office Statutory Fund Assets | $50.6 b | $50.4 b | -0.4% |
Source: APRA Quarterly Superannuation Performance and Quarterly MySuper Statistics Report, March 2022.
Younger people drive the burst in new SMSF
Statistics from the Australian Tax Office (ATO) for 2020-2021 reveal the largest increase in the number of SMSF being established since 2017-2018, with 25,796 new funds created – giving a record number of SMSFs at 1.1 million. On average, this equated to 2,100 new funds being established every month for the period.
Much of the SMSF growth has come from the 35 to 44 years age group, with this sector comprising around one-third of all new establishments. That rises to nearly 45 per cent if you include those aged between 25 and 34.
This trend for younger people to set up an SMSF is in stark contrast to the earlier practice where people waited until they were in their 50s or nearing retirement before switching from an APRA-regulated fund to a SMSF.
Stephen Nardi | Superannuation Manager
This SMSF growth trend also suggests that (as in the GFC) in times of uncertainty and market volatility, people want to take more control over their finances and bring things closer to home. With superannuation, SMSFs provide the ultimate in terms of flexibility and control – as well as far greater compliance responsibility.
Pat Kelly, Director and Senior Financial Adviser at The Peak Partnership, says younger people often look to set up a SMSF to get into the property market, but that is a very long-term solution.
"The issue for younger SMSF investors is they will likely have lower balances, meaning the need to be heavily leveraged utilising a limited recourse borrowing arrangement (LRBA) to acquire a property and the asset allocation would likely be too concentrated – which the ATO is not supportive of because of the under-diversification risk," Pat says.
"Taking into account the annual costs of administering a SMSF, we think the ASIC $500,000 minimum SMSF balance is a good rule of thumb to follow. Establishing an SMSF with smaller balances may only be appropriate when large regular or large lump sum contributions are likely to be made, otherwise the compliance costs can be counter-productive to the funds purpose," Pat added.
If you want to explore your options in the Self-Managed Superannuation space, our Financial Advisers would be happy to share their expertise. Just contact Pat Kelly or Jenny Kitching at The Peak Partnership.