Almost all Australians are paid superannuation, but many of them are unaware of the opportunity to grow that money for their future retirement.
Superannuation funds manage your retirement funds by investing them on your behalf. However, because they’re designed to benefit the majority within the fund, their decisions may not always align with what’s best for you.
Self-managed super funds (SMSF) are a way for people to take control of their superannuation and direct it to a more profitable goal. They provide flexibility in retirement, better investment options and reduced costs such as fees and taxes. While SMSF’s area good option for some, they do require work and specialist knowledge, both to set up and maintain. That’s why super advice is such an important part of a successful retirement strategy.
Why Self-Managed Super Funds
Self-managed super funds are established solely for the benefit of their trustees, of which there can be between one and four. They are a way of managing and investing trustee money with the aim of growing it for retirement. Unlike other super funds however, SMSF’s are solely controlled by the trustees. This means that SMSF’s can be tailored towards the individual needs of the trustees rather than to benefit a large group, as is usually the case.
SMSF’s can be a good option over industry superannuation funds for a number of reasons:
- Freedom: SMSF’s provide more investment options than any other super fund. They also allow for tailored tax strategies to help trustees grow their super saving and reduce tax payments upon transition into retirement.
- Flexibility: Operating an SMSF means you can make changes quickly at your discretion, allowing you to capitalise on rapid changes in the investment market. Because SMSF’s are run by trustees to benefit trustees, changes and ideas can be shared openly, allowing transparency and visibility of shared goals.
- Reduced taxes: Taxation fees for operating an SMSF are capped and not based on a percentage of your super balance. This means that the more an SMSF grows the more cost-effective it becomes.
- Reduced fees: In the event you choose to combine the super assets of up to three other members (such as family members) into your SMSF, you can increase your funds and investment opportunities and pay only a single set of fees.
Why It’s Important to Get Super Advice
The trustees of a SMSF are responsible for making investment decisions and directing a successful money-generating strategy based on those investments. While SMSF’s can be profitable, they do require effective decision-making and administrative skills, both to encourage financial growth, ensure compliance and avoid potential costs and errors.
SMSF’s have strict administrative obligations requiring careful collection and maintenance of records. These include completion and recording of financial statements, tax returns and annual independent audits.
Because of this, many trustees choose to engage specialists to help manage the accounting, auditing and tax reporting processes, and in most cases to also provide financial and investment advice. However, with the large amount of trust placed on consultants it’s important to note that trustees of an SMSF will always have the final say on what decision to make.
Getting the Right Advice
When soliciting super advice, it’s important to find consultants and specialists that are competent and accredited. While it’s in everyone’s best interest to grow your superannuation, the quality of service that financial advisors provide will differ from person to person. A good financial advisor will provide well-supported advice and will have a sound understanding of Australian tax, investment and superannuation law.
Before selecting a financial advisor consider:
- How long have they been a financial planner or advisor?
- Are they licensed to give financial advice and if so, with whom?
- What other qualifications do they have?
- Are they independent or tied to a particular licensee or bank?
- How do they research the latest financial news and legislation?
- What are the fees for their services?
- Do they get paid commissions for selling particular financial products?
Recruiting financial advisors to help manage your superannuation will mean that you can focus on living your life, while knowing that your retirement is looked after.