DIY super making money for the wealthy, leading to losses for battlers

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Australians wanting to take a “do it yourself” approach to their superannuation may be better served by a self-managed super fund (SMSF) if they already have healthy retirement savings available, while those with smaller super balances may not get the best returns from a SMSF, according to a new report.

The Industry Super Australia (ISA) paper, ATO self-managed super funds: a statistical overview 2015-2016, found that while Australians with $2 million or more in retirement assets have enjoyed healthy returns from their SMSFs in the past, those with lower-value assets received smaller, or even negative returns on their retirement investment.

SMSFs annualised return by asset range (2016)

Super assets 3 years 5 years 8 years % of entities by fund size % of assets by fund size
$1-$50k -9.8% -13.1% -13.0% 5.6% 0.1%
$50k-$100k -3.2% -5.0% -5.4% 3.7% 0.3%
$100k-$200k -0.5% -1.3% -1.8% 8.6% 1.1%
$200k-$500k 2.0% 1.9% 1.2% 24.0% 7.4%
$500k-$1m 3.2% 3.7% 2.9% 24.8% 15.8%
$1m-$2m 3.9% 4.5% 3.8% 19.0% 23.6%
$2m+ 5.1% 5.6% 5.1% 14.3% 51.7%

Source: ISA

While past performance is not a reliable indicator of future performance, the ISA found that even SMSFs earning positive returns over 2015-2016 did so at a rate below the 2016 APRA-regulated fund average (2.9%) and industry super fund average (4.1%) for assets lower than $2 million.

ISA chief economist, Dr Stephen Anthony, said that based on this data, while SMSFs may work for sophisticated, high wealth individuals, they may be less suitable for everyday Australians, and not just because of the lower average returns:

“The administration costs of running an SMSF with a small balance are often too high.”

“It’s important to know how your super fund stacks up on fees and net returns – otherwise you could be in for an unpleasant surprise.” – Dr Stephen Anthony


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