SMSF vs. Industry Super: 6 Factors to Consider When Choosing Your Super Strategy
Self-managed super funds get a lot of good press for giving Australians far more control over their retirement savings and investment decisions. However, even if you work with the best SMSF Accountants Melbourne has to offer, you may not get the outcome you want if you haven’t carefully considered the factors that set SMSFs apart from industry super funds.
To ensure you make a sound decision that safeguards your financial future, keep the following points in mind when considering your super strategy:
1. How much control do you want over your investments?
One of the main differences between an SMSF and an industry fund is the level of control you have over your investments. As the name suggests, self-managed super funds give you direct control over where your money is invested, giving you the flexibility to tailor a strategy to suit your needs and risk profile.
By contrast, industry funds offer pre-determined investment packages managed by professionals. For those who prefer a more “set and forget” approach to retirement planning, this hands-off style may be ideal.
2. How much are you willing to spend on admin costs?
With great freedom comes greater administrative responsibility and more fees. SMSFs typically come with higher setup costs, and you’ll likely also pay more in ongoing management costs due to their flexible, personalized nature. As the trustee of an SMSF, you’ll need to cover the costs of record-keeping, compliance requirements, and tax lodgments. Of course, if you’re able to generate more earning potential with your investments, this can be well worth it. However, many people prefer the low fees and lack of administrative responsibilities offered by industry funds.
3. How much investment expertise do you have?
As you may have surmised from the first two points, SMSFs are going to serve you best if you have a decent amount of financial expertise and access to diverse investment opportunities. SMSFs are great for those who want to leverage their knowledge and guide their own financial future. By contrast, industry funds generally determine your goals and risk tolerance before recommending one package out of a set range.
4. Do you want insurance with your super?
Industry funds usually provide a range of insurance options, including life insurance, income protection, and total and permanent disability cover (TPD). SMSFs generally don’t offer as many options. So, when choosing between funds, take the time to assess your needs and the level of coverage it would take to protect yourself and your loved ones.
5. Is estate planning important to you?
SMSFs are known for giving investors more control over estate planning. This can be beneficial for families with complex structures and people who are particular about their wishes. With an industry super fund, there generally are procedures in place to manage your account after death. However, you will trade control for automated simplicity.
6. How much responsibility are you willing to take?
SMSFs come with a host of legal and regulatory requirements that you’ll need to strictly follow to remain compliant with the Superannuation Industry (Supervision) Act. From monthly record keeping to annual audits, it’s a lot to handle. This is why many people prefer the ease of an industry fund that manages compliance on their behalf.
Ultimately, your choice between an SMSF and an industry super fund must be based on your personal needs and circumstances. Articles like this one should not be taken as financial advice since that can only be given by a qualified financial advisor who knows your circumstances. So, if you want to make a genuinely well-informed decision, seek out a reputable financial advisor in your area.
