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Drift to SMSFs may face reverse
Former senior trade union official and industry funds trustee, Paul Howes has pointed to the drift to self-managed superannuation funds (SMSFs) being reversed with members rejoining Australian Prudential Regulation Authority (APRA)-regulated funds as SMSF balances run down.
Howes, who is now a partner at KPMG and head of wealth management advisory, used an analysis of the Government's consultation paper on enshrining the objective of superannuation to suggest that it may force funds to change their business models.
"The government paper proposes that ‘superannuation is meant to help fund a person's retirement: it is not for unlimited wealth accumulation'," he wrote.
"Assistant Treasurer Kelly O'Dwyer re-iterated the message that super is there to provide income in retirement to substitute or supplement the Age Pension. It is not meant to be predominantly about estate planning."
Howes said this would require funds to change the way they operate, and upgrade systems and processes for gathering and analysing information with fund staff needing to up-skill.
He suggested that there might also need to the underlying tax settings.
However looking SMSFs, he pointed to earlier KPMG research which suggested there were significant implications.
"If members' balances run down in retirement, just as they ran up during members' working lives, would not many SMSFs reach the point at which the remaining balance was below the threshold for cost effectiveness?" Howes asked.
He suggested that there could then be a reversal of members rolling out of large funds into SMSFs.
Howes also questioned how an SMSF invested in real property or other lumpy assets ran down its balance, without at some point being required to sell the assets.
"There are likely to be major implications for every sector of the superannuation industry, and every participant in the industry, from a long term shift in the focus of policy setting to retirement incomes rather than wealth accumulation," he said.
"But this is what needs to happen, and this week has kick-started that necessary process."
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