We have noticed a focus in recent weeks on the expansion of the SMSF sector, with comments regarding the risks and potential lack of controls in the sector, and concerns from the major super funds that with over one third of all superannuation now in the hands of SMSF Trustees the industry was seeing fee opportunities slip out the door.
With that of course have been a range of strategies from various parties designed either to stem the flow, or get a part of the action.
Industry, corporate and retail super funds should all have concerns, but the Hon Nick Sherry, former Assistant Treasurer, indicated his view was that the expansion of the SMSF sector would start to slow as a proportion of the total $1.54 trillion superannuation pool, even though this total is forecast to grow to $3.5 trillion by 2025, and potentially $7 or $8 trillion by 2035.
It is worth bearing in mind that although the SMSF sector controls 35% of total funds, it is estimated that only 3% of the population are the beneficiaries. Most of the funds with larger balances were probably set up under previous governments, and this supports Sherry's view that while the gross amount will grow, the proportion may not.
Sherry also predicted, as have a number of others, that there will be a significant decline in the number of APRA regulated funds as My Super comes into effect and the focus on the low cost default option drives a focus on size and fees. Meanwhile the SMSF sector will continue to focus on performance and value.
Former PM Paul Keating also weighed into the Super debate this week, calling for the Super Guarantee Levy to be increased from the current 9% to 15%, with 3% of that to be allocated directly to the aging population, while taking a swipe at the SMSF sector and the overly high allocation to equities.
Expect to hear more of probably the same arguments going forward. Australia's much vaunted system for funding the retirement of an ageing population may be the envy of much of the world, but perfect it certainly isn't. Meanwhile everyone in the financial services industry here and abroad are after their slice of it, including Treasurer Swan who'd love to tap it to fund the looming budget deficit.
Meanwhile AFM's Equity Index performance for October stands at 1.53% and 8.72% year to date. The market may have rallied but there are plenty of managers who still remain cautious with some finding returns hard to come by. Over the past 12 months 60% may have outperformed the ASX200, but a further 20% have failed to produce a positive return.
Have a good week-end.
Regards,
Chris.
