Self-managed super storm brews over Canberra

The government's planned super reforms target about 30 per cent of the self-managed super movement. If Julia Gillard isn't careful she may, via accountants, unleash a voting force capable of wiping her out in September.

As the government leaks its revised superannuation attack plans it clearly has no idea of the latent voting forces it is going to unleash.

The self-managed fund movement is developing into an enormous force in superannuation, which is being harnessed by the accounting profession and not by the specialist superannuation advisers who talk to government.

A new self-managed fund superannuation survey has shown that the greatly expanded self-managed fund movement has the power to sweep from office any government that unfairly attacks superannuation. The Gillard government has a knife poised to plunge into the heart of around 30 per cent of the Australian self-managed superannuation movement. In turn self-managed funds control about 30 per cent of the money in Australian superannuation and about half the funds used to fund retirements. The government says it looking to attack the rich but the self-managed fund movement and its accounting advisers will know that is complete nonsense.

I hope all members of parliament – but particularly government members – read the survey Intimate with Self Managed Superannuation,commissioned by Russell Investments and SMSF Professionals’ Association of Australia. The independent research firm CoreData conducted it. In all, 437 self-managed fund trustees were surveyed but the research extended to those with superannuation outside of the self managed fund movement and high net worth individuals.

According to press reports, the government is looking to lift the tax rate on funds with superannuation balances over $800,000. Of the self-managed funds surveyed, 26.8 per cent had investments between $750,000 and $3 million. Another 3.7 per cent have investments over $3 million – a total of just over 30 per cent.

To retire using superannuation and not the government pension, you need about $2 million and clearly a lot if self managed funds are getting there but they are not rich – they simply provide for adequate retirement and without requiring the government pension (Gillard's super plan is far too rich, February 4).

The trustees of self-managed funds are not big users of financial planners and the survey shows their use is declining.

Accountants are increasingly becoming the primary source for overall financial advice among self managed funds. Some 27.8 per cent say accountants are their current primary source of advice, up from 22.9 per cent in 2011.

Trustees also cite accountants as their secondary source of advice above all other advice sources

Accountants are not normally active politically but if self-managed fund retirement plans are butchered by Canberra they have the power to swing a lot of votes at the September election because they are also key advisers to small enterprises, Australia’s largest employer group.

A major attitude gap is opening up between those in big funds like the Industry Funds, MLC, BT Colonial etc – the so-called APRA regulated funds.

Some 63.5 per cent (down from 65.7 per cent in 2011) of self-managed fund trustees say they are reasonably confident that they are on track to achieve their retirement goals. In the big funds there is much less confidence about meeting retirement targets, with 43 per cent saying they will fall short. And while most people with self-managed funds are aged over 40, advisers say there is increasing interest among young people.

But the reduction in concessional contributions caps has substantially altered the way in which superannuants save for retirement. More than half (53.4 per cent) of self managed fund trustees say they will use a different strategy to save for retirement as a result of these changes, with 74.6 per cent of these saying that they will invest their savings outside of superannuation.

On average, self managed fund trustees would have invested an extra $53,409 each in 2011/12 if contribution restrictions had not applied. This equates to a total of $16.8 billion that the super system could have failed to capture from SMSFs in 2012.

The research shows that in 2012, self-managed funds allocated 33.9 per cent of their investments to cash and term deposits, compared to only 25.6 per cent in 2011. On average the funds have 37.1 per cent allocated to Australian equities, down from 43.5 per cent in 2011.

The high interest rates in long currency term deposits have played a big role in the switch. They would have underperformed those with higher equity proportions but they slept better – particularly those nearing or in retirement.

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