Self-managed super funds are being attacked on all fronts, with sections of the media, retail and industry and funds and politicians peddling damaging falsehoods. Most recently we've seen a flurry of newspaper articles from many publishers spreading false statements on SMSFs that suggest they are used by people to avoid relying on the government pension.
Politicians and journalists need to understand what really happens in superannuation. The reality is very different to what is sometimes portrayed.
For example, if you end up with inadequate funds to finance your retirement then, with the help of a financial planner, you can play asset-income test games to maximise your government pension.
At the lower income end of town, given longer life expectancy, there is a limited chance of saving enough to fund retirement. That means government pensions will be used and, unfortunately, in some cases superannuation money can end up funding a cruise to assist in lifting the level of the government pension.
Meanwhile, the majority of people with higher incomes start a SMSF to finance their retirement. More than 55 per cent of superannuation pensions come from SMSFs.
The most outlandish was the claim by one paper that SMSFs avoided paying tax by claiming the tax benefits of franked dividends, forgetting that dividend franking is legally available to all local investors in all forms of superannuation funds.
I must confess I am biased because I have had a SMSF since 1978. I cringe when articles suggest that SMSF are badly regulated when that is not the case, or that SMSF have huge borrowings (less than 1 per cent are leveraged on real estate and it would be nil but for the approval by the politicians).
Many say the tax rules are too generous but the current government abandoned plans to lift taxes on superannuation funds in pension mode.
It is as if there is a coordinated campaign against people who try to fund their own retirement via SMSFs. The most obvious possible peddlers of misleading statements on SMSFs are the big industry and retail funds. They have lost big slabs of market share to SMSFs so it is possible they are engineering the false stories.
But many of the articles are so factually incorrect that I find it hard to believe the established funds would stoop to that. It is also possible that the false stories originate from Treasury.
Many in Treasury have always hated both superannuation and dividend franking. Under the Labor government, Treasury published an outlandish series of falsehoods claiming superannuation cost the nation $30 billion. It calculated that sum by adding two figures its researchers said should not be added; assumed very high returns and ‘forgot’ that those who contribute worthwhile sums to superannuation do not use government pensions.
A more recent document was not much better. Treasury was campaigning and did not worry too much about the facts.
Meanwhile, SMSF trustees have proved to be able to gain returns that rank with the big funds.
There are issues with SMSFs that require criticism, including what is happening in the real estate sector as a result of the relatively recent government rule changes allowing borrowing for investment in housing.
Rather than make outlandish claims about the delays in compulsory superannuation, politicians need to look at ways to make superannuation and the means/assets test rules be more effective in funding retirement.
The accountancy profession that played such a big role in establishing SMSF needs to stand up and be counted.