Sent: 21-07-2009 12:45:02
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Comparing Super Fund Returns
In late June the Australian Prudential Regulation Authority released some important research which some of its staff were to present in a paper to the "Australian Colloquium of Superannuation Researchers" which is held every year by the University of New South Wales.
The paper is titled, "Investment Performance Ranking by Superannuation Firms". Not exactly the most riveting topic you'll ever see but the information found in the paper makes very interesting reading for anyone who has some involvement in superannuation.
Many people will find the whole paper very interesting. I suspect however that most people will find Section 7 (titled "Summary and Discussion" and only a bit more than 2 pages) the most compelling.
Section 7 has an interesting proposition as to why Self Managed Super Funds have experienced such rapid growth in the recent years:
"Inability of investors to reliably compare individual funds or investment options, as we have argued in this paper, has created an information asymmetry in the market. This together with inadequate fund disclosures ... has led to a form of market failure, where given the necessary resources many investors may chose to minimize their dependence on the managed fund market. This may explain the recent rapid growth of self-managed funds to become the largest superannuation sector in Australia ... However, for the bulk of workers who have insufficient assets or other resources, the self-managed alternative is not economically justifiable and they remain captives of the institutional market."
ASIC think that you need about $200,000 in assets before SMSFs become cost-effective.
In many areas and places great strides are being made in reducing the cost of administering Self Managed Funds. No doubt some of these savings will be passed onto investors. Perhaps in time ASIC might reduce their cost effective asset level threshold.
The ASIC research will no doubt be controversial. It will be interesting to see how organizations and academics and other interested parties respond to it.
You can download a copy of the report here.
AAT SMSF Case
On another note the Administrative Appeals Tribunal has agreed with an ATO decision to remove a Self Managed Super Fund's tax concessions. The fund failed the In-house Assets test by loaning most of its assets to a related company and then took many years to fix the problems after the ATO asked them to correct the errors.
It is always interesting to see any Court or Tribunal case involving super funds. But this case involved a fund which was breaching the super laws and then delayed fixing them.
This is a case involving super fund trustees who for a variety of reasons appear to have not wanted to do what had to be done to keep their fund within the super laws even when asked to do so by the ATO.
It's for this reason that I don't consider this a particularly important case. What it does show is the patience the ATO display to non-compliant super funds. Will they be so kind in future? Perhaps these trustees might have faired better if they appointed enduring powers of attorney or simply shut the fund down and moved to a retail (profit or not-for-profit) super fund.
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