We all know that we need to have a superannuation fund, it’s a compulsory part of our lives that helps ensure we have enough money to survive through retirement. For some of us we are happy to let our super grow in retail or industry funds however many people are becoming increasingly frustrated by the performance of these accounts and have decided to look elsewhere for an account that better suits their needs. For many people this has lead to the opening of their own self managed super.
What is a Self Managed Super Fund?
A self managed super fund is set up for the sole purpose of providing for your retirement and is regulated by the ATO. This allows you to take control over your super without having managers to invest your retirement savings. A self managed fund is better suited to for people with a large amount of super and who have extensive skills and knowledge in financial and legal matters.
While this may sound great, it is important to note that once you have set up your fund you are liable for all of the decision making, even if you employ the services of a professional to give you advice. You are also responsible for putting together and maintaining a budget for your account including costs for accounting, tax, legal fees, audits and any any professional advice you receive on your investment strategy. All of these additional costs will eat into your investment returns so you need to make sure you have enough money coming into your account to cover the costs long term.
Financial Confidence is Key
You will need to be confident that you have the financial skills, or know someone with financial skills to ensure you are confident in making the right investment decisions. Before you can even start investing you will need to come up with an investment strategy. This thoroughly sets out the objectives and types of investments your account will make. It is vital that your strategy is regularly reviewed and continues to reflect the purpose of your fund. As your nest egg grows and develops any changes made to the investment strategy need to be documented.
Another key feature of your account is the ability to have up to 4 members. All members in the self managed super fund must be trustees. This means that all members run the account for their own benefit and are still responsible for complying with the super and tax laws. However even with the ability to have 4 trustees linked to the fund all income invested into the account can only be used for your retirement.
Love being in complete control?
If opening a self managed super fund does interest you but you want a professional to look after the account for you there are advisors you can employ to watch over your fund and help with investment decisions and administration. However, it is vital that you properly understand what your advisor is doing because you can not pass on any responsibility to your advisor, at the end of the day all decisions made for the super fund come down to you.
Wondering what you can invest in?
Having access into a broader range of investment opportunities is the reason most people find themselves opening a self managed fund. Through your super fund you are able to invest in the usual investments such as property, shares and term deposits. Your new account also gives you access to hold alternative assets in collectibles such as jewelry, artwork, antiques, vintage cars and wine (just to name a few). While that may sound great, you need to be sure you are not using any of these assets now, in the present day. That means you cannot wear any of your jewelry, display any artwork or antiques, drink any of the wine or drive your vintage cars.
Self managed super funds aren’t for everyone. They can be very time consuming and hard and expensive to maintain. Although they do offer freedom and control that many other super funds do not.
- * Self managed superannuation fund
- * Provide more control and flexibility over your super and retirement
- * Ability to invest assets where ever you want
- * Capacity to list up to 4 trustees
- * Liable for all decisions made by the fund even if you have professional help or another member makes the decision.
- * Still need to comply to the super and tax laws
Before you embark on the process of opening your own super fund, take the time to speak to an expert who will be able to tell you whether this is the option for you. Already have your own SMSF, would you recommend other people open their own self managed super fund?