Most people have received their annual super statement to 30th June 2022 in the last few months. Most returns have been negative for the last 12 months on the back of higher inflation, rising interest rates and geopolitical tensions around the world. This often leads to people questioning if they’ve got the right fund. There are three main types of super fund, Industry Super Funds, Retail Super Funds and Self-Managed Super Funds.
Industry Super Funds offer a low cost, pooled option with limited investment and insurance options. They are a simple option and due to the pooled nature of their investment choices, many Financial Planners use this style of fund for their younger, lower balance clients. There are other types of more sophisticated super accounts including Retail Funds and Self-Managed Super Funds.
Retail Super Funds are where you decide to purchase a fund from a product provider. Modern retail Super Wrap offerings have thousands of investment choices with a wide choice of risk and return and your account is separate to all other members. Care and guidance need to be taken to ensure your portfolio of investments is well diversified with such a huge choice. This choice enables your portfolio to be customized to say protect against downturns if you are drawing a pension or to screen out investments with questionable ethical or environmental credentials if that’s your preference. These may suit people with higher balances or who are making larger contributions and want more control and flexibility around investment options and the potential tax on transferring to pension phase within their super.
Self-Managed Super Funds are where you set up your own super fund, usually with up to 6 other family members so you can pool your funds to invest. SMSF’s offer the most investment choices and flexibility but are expensive. The ATO suggests the minimum balance to justify the set up and ongoing costs with a SMSF is $500,000. Purchasing property in a SMSF comes with even more costs so is generally only for those with very large balances. There are significant compliance requirements and most SMSF’s are paying administrators, tax agents, auditors and financial planners each year.
The key with super is to ensure you have a fund that matches where you are in your financial journey and not something that you fell into or that suited where you were years ago.
If you’d like an obligation free review of your situation, to review your super structures, call us for an appointment today.
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