One in five trustees considered ditching their self-managed super fund in favour of an industry or retail fund in 2019, up from only 4% in 2013.
There were five main reasons, according to a survey by Vanguard/Investment Trends.
SMSF trustees bemoaned the high fees paid to accountants, auditors and solicitors. They said that in addition to these big costs, they repeatedly received bad service and bad advice from the professionals.
As well, trustees realise that managing an SMSF gets more difficult as they age. There are investment decisions to make and investments to monitor, plus administration and compliance requirements.
Trustees report they spend eight hours a month running their SMSF, with investment selection and research taking up 3.3 hours, followed by two hours of ongoing monitoring, 1.7 hours of administration and paperwork and 1.1 hours in keeping up with regulations.
Trustees are not happy with their investment returns and realise that industry funds perform just as well as, and in many cases better than, their SMSF. A common comment was that the running of the SMSF was time-consuming for little gain.
But while one in five trustees thought about ditching their self-managed super fund, only 10,000 funds (out of 600,000) were wound up last year.
“Twenty per cent thought about it, but only 10,000 actually closed their fund,” says Michael Blomfield, chief executive of Investment Trends.
King Loong Choi, senior analyst at Investment Trends, says SMSFs were also wound up because of divorce between trustees, who are often husband and wife, and the death of a trustee.
SMSF growth slowed over the past year to 4%, with just over 20,000 being set up. This is down from 27,000 in March 2018 and 41,000 in March 2013.
But Blomfield predicts stronger numbers of SMSFs for the year ahead after the defeat of Labor’s franking credit initiative and the Coalition’s return to government.
Investment Trends says younger people are setting up funds, with the average age dropping to 47 this year from 52 two years ago. SMSFs are started with less money too: $230,000 this year compared with $420,000 two years ago.