Some SMSFs are also underperformers

31 May 2018
| By Hannah |
image
image image
expand image

The Productivity Commission’s (PC’s) finding that many people have their superannuation in underperforming funds also extends to self-managed super funds (SMSFs), founder of SMSF Benchmarks, Nick Shugg, has said.

Shugg said that many SMSF trustees were disengaged with their funds and had “no idea” how it was performing, nor what they should do were it consistently underperforming.

“Trustees have an obligation to review their investment strategy, but most just pay lip service to that, to satisfy a ‘compliance hassle’,” according to Shugg.

He warned that there could be significant consequences to SMSFs not being managed well.

“It could mean that trustees fail to get the lifestyle they want, and it could mean that the whole superannuation trade-off breaks down. This is a problem for all of us because SMSFs make up a significant part of our economy.”

Shugg was referring to the “trade-off” that he thought the Federal Government applied in handing out tax breaks to save money in super, and thus be more self-funded in retirement, on the trade-off that the Aged Pensions saved should be greater than the tax benefits handed out.

Shugg said, however, that it was not the role of the Australian Taxation Office, which only had the resources and mandate to check if trustees were managing their fund for compliance, to worry about whether trustees were actually doing a good job of managing funds.

Rather, he said that the conversation with trustees needed to change to ensure better performance.

“We don’t necessarily need a compliance ‘stick’. It may be more effective to provide a carrot to lift the average performance of SMSFs,” Shugg said.

“Many self-directed trustees … are often unaware of the range of alternative approaches they could be including in the mix, which may lead to better outcomes.

“We need to change the conversation with trustees, to make it fun and less threatening for them to use benchmarking as part of a Strategic Management Process. If they start to look at how their fund is actually going, they will become more engaged, and open up to discovering other investment approaches, and they’ll be better placed to make good decisions and get better outcomes over time.”

Read more about:

AUTHOR

Recommended for you

sub-bgsidebar subscription

Never miss the latest developments in Super Review! Anytime, Anywhere!

Grant Banner

From my perspective, 40- 50% of people are likely going to be deeply unhappy about how long they actually live. ...

1 year 6 months ago
Kevin Gorman

Super director remuneration ...

1 year 6 months ago
Anthony Asher

No doubt true, but most of it is still because over 45’s have been upgrading their houses with 30 year mortgages. Money ...

1 year 6 months ago

Economists from the big four banks have all predicted the RBA to deliver another rate cut during its July meeting; however, some admit the decision will be a close call....

2 hours 50 minutes ago

AMP’s strong 2024–25 returns were anything but a fluke – they were the product of a carefully recalibrated investment strategy that began several years ago, when the fund...

2 hours 58 minutes ago

ASIC is “considering what options” it has to hold super trustees to account for including the failed schemes on their platforms, according to its deputy chair....

2 hours 58 minutes ago

TOP PERFORMING FUNDS

ACS FIXED INT - AUSTRALIA/GLOBAL BOND
Fund name
3y(%)pa
2
DomaCom DFS Mortgage
95.46 3 y p.a(%)
5