Is a self-managed super fund right for you?

A recent report by Rice Warner comprehensively evaluates the comparative costs of running a self-managed superannuation fund (SMSF) versus an Australian Prudential Regulation Authority fund (APRA).

Firstly, let’s take a look at what each fund is and how they’re set up.

A self-managed superannuation fund (SMSF) is a type of private super fund (a trust) that’s created and managed by yourself. Compared to a professionally managed fund, such as an industry or retail fund, which manages your super for you.

Super funds regulated by APRA are typically large funds with hundreds or thousands of members, whereas a SMSF is managed solely by the trustees of the fund, namely yourself and other members whom you affiliate with.

The key findings of Rice Warner’s report are:

Since 2013, industry fund fees have increased while SMSF fees have decreased.

SMSFs with balances;

  • less than $50,000 are more expensive than all alternatives.
  • between $50,000 and $100,000, the cheapest SMSFs are cheaper than only the most expensive APRA funds.
  • between $100,000 and $150,000 are only cost-competitive if the Trustees use a cheaper service option or undertake some of the administration themselves.
  • of $200,000 or more are competitive with both Industry and Retail funds even for full administration
  • between $250,000 to $500,000 become the cheapest alternative provided the Trustees undertake some of the administration, or, if seeking full administration, choose one of the cheaper service options.
  • of $500,000 and above are usually the cheapest alternative:
    • For SMSFs with only accumulation accounts, the fees at all levels are lower than the lowest fees of APRA regulated funds.
    • For SMSFs with pension accounts, only the highest full administration fees exceed the lowest fees of APRA regulated funds.

As indicated in Rice Warner’s report, the fixed fee nature of SMSF administration will always be more competitive, the higher the fund balance, and this consideration kicks in at about $200k. The ability to combine the balances of up to 4 members (soon to be 6) only enhances the cost advantages. Naturally, cost is not the only determinant of the suitability of one fund type over another.

If you’re considering transitioning to an SMSF or would like to discuss the pros and cons of an SMSF versus APRA fund, we recommend calling our office on 1300 707 766 to speak with our super fund specialists.