The Australian Taxation Office (ATO) has recently released (2 March 2011) their quarterly SMSF statistics to the end of December 2010. A lot of attention is directed to these statistics about the continuing growth of the SMSF industry, but what are some of these statistics really telling us about self-managed super funds?
I outlined below 10 key things and my views about the latest statistics from the ATO:
- The average fund balance has now grown to $957,248. However, there are still more than a quarter of all SMSFs with balances of less than $200,000. Conversely, we see a quarter of all SMSFs with more than $1 million.
- I predict that by the end of the 2013 calendar year, there will be a one (1) million SMSF members across 530,000 SMSFs. These numbers are supported by consistent year on year % growth, which will see net establishments each year continue to grow at about 6-6.5% p.a.
- The most active growth is happening with SMSF in the range of $200 – $500k. The number of these funds is up 7% from the prior year, 2009 (in terms of the percentage of funds with asset balances in this range). Whilst markets will have influenced these numbers to an extent, this growth will also be supported by younger entrants to the SMSF market (Gen X, inclusive of the 35-44 age bracket) who are looking for greater choice and control, including with strategies such as borrowing in super.
- Interestingly by way of comparison between the 2008 to 2009 financial years, listed shares as an asset range dropped from 34% to 26% of total fund assets. Whilst market correction (GFC) will have influenced this, it also suggests that many trustees moved to more cautious investment strategy positions of cash and term deposits. To support this theory, cash and deposits increased to 23.22% from 20.25%. I believe it shows that many trustees do take an “active” role in the management of the SMSFs.
- There is growing exposure to both residential and commercial property within SMSFs. This will have predominantly come from interest levels in limited recourse borrowing arrangements.
- There appears to have been a ‘clean out’ of lower balance SMSFs (under $50k). These funds will have either simply be wound-up (maybe by the ATO where no assets actually ever existed) or further contributions were made into the fund to improve their viability.
- There does appear to be new-comers to SMSFs in the $100 – $200k mark. Many of these people will be likely to pursue direct investing arrangements to make the fund’s operations cost-comparative to an APRA fund (but providing greater choice).
- There is a significant decreasing trend in the number of SMSF wind-ups. The number of wind-ups from 2008 (7,749 funds) to 2009 (3,502) has more than halved. Year-to-date 2010 figures to date suggest a further decline, which only supports the 6 – 6.5% net growth rates predicted above.
- Whilst there is a lot of industry-talk about the benefits of a “Family Super Fund” or “Enduring Family Super Fund”, the ATO statistics don’t support this as a concept, with decreasing numbers of funds having 3 or 4 members. Four member funds now represent only 4.4% of the market. Whilst these percentage changes are substantial across SMSFs, single member funds are growing to nearly a quarter of all SMSFs (22.8%). I find this amazing that we having a growing trend in single member funds but a decreasing use of corporate trustees? There could be many trustees setting themselves up a significant fall at an estate planning level!!
- Operating costs to manage SMSFs appear to be relatively constant, which means with growing account balances makes their costs in percentage terms very attractive. This is likely to be as a result of a range of factors including efficiency gains in delivering the SMSF statutory obligations and more price-sensitive trustees (due to the GFC).
It will be interesting to watch the continued growth and evolving beast that is self-managed super funds…