Is a Self-Managed Super Fund right for you?

Written by Hannah Oliver

The growth in self-managed super funds suggests that they are an appealing option, but you need to consider the whole picture to make the best choice. Our financial planning partner, Bridges, explains the pros and cons.

There is no doubt that self-managed super funds (SMSFs) are a popular choice for Australians when it comes to saving for retirement.

The latest statistics from the Australian Prudential Regulation Authority (APRA) and the Australian Taxation Office (ATO) indicate that in June 2017, there were almost 600,000 SMSFs in operation1, and they controlled almost $700 billion in assets2. This represents nearly one-third of the country’s total super assets of 2.3 trillion.

Almost 30,000 new SMSF funds were established in the 2016-17 tax year1, which continues a consistent pattern of growth in this sector.

So what is the attraction?

Being able to set your own investment strategy, and the increased scope in investment options — such as direct property investment and collectibles — has attracted many to this form of superannuation saving.

Many also believe that costs can be minimised if they run their own show, giving them more flexibility on when they can move to retirement and start drawing a pension from their accumulated funds. Some may also be attracted to the idea of cycling some of their super investment back into their own business, such as through using their fund to purchase business premises.

There are also some advantages that SMSFs provide in relation to estate-planning. For example, a death benefit can continue to be paid to a dependant in the form of a pension, which means the super fund doesn't have to be closed upon death.

What’s the downside?

Having an SMSF involves a commitment to running the administration, compliance, and investment strategy for your fund and there are stringent rules to be followed. If you slip up, there are significant financial penalties that may be applied. In short, the buck stops with you.

Certainly, you can obtain advice and assistance to manage the administrative and investment burden, but this comes at a cost.

A major factor in deciding whether an SMSF is right for you is the size of your super assets. Generally, you need a substantial starting sum in the hundreds of thousands to make it worthwhile, and to create the cost efficiencies that can compare favourably with using a retail managed fund.

Are you better off in a managed fund?

For some of us, a retail managed fund may be a better option, particularly if you are not prepared to take on the responsibilities that come with running an SMSF.

Managed funds have the advantage of taking care of all the trustee responsibilities and fund administration on your behalf. For some, this can be the deciding factor.

While managed funds cannot provide all of the investment options and flexibility that are possible in an SMSF, they can still provide highly sophisticated and diverse asset allocations that can match well with your desired investment preferences and risk profile. They also have the potential to generate significant returns.

Cost-wise, you know upfront what a managed fund will charge in terms of entry, exit, and management fees. The question of whether this will be more or less than the costs of running your own SMSF does not have a simple answer. Generally speaking, it will depend greatly on the size of your super assets: The higher the balance, the more scope there is for SMSFs to have a cost advantage.

Weighing up the pros and cons

The telling factor in whether an SMSF is right for you will often come down to getting the right advice that takes your specific circumstances into account. There will never be a cut and dried answer on whether an SMSF is your best option because of all the variables relating to cost, investment strategy, administrative obligations, insurance, and personal desire to control your own fund.

A financial adviser can help you weigh the benefits against the risks to make an informed choice that suits your personality and financial situation. They can also give you expert advice on how to best manage the responsibilities of running an SMSF using specialised service providers. Seeking such advice could well be the best first step to take.

Sources:

1 Australian Tax Office SMSF Statistical Report.

2 Australian Prudential Regulation Authority.

Take the next step To discuss your financial situation, make an appointment with a Bridges financial planner. We have an established alliance with Bridges, to provide our customers with financial advice. Bridges has been helping Australians with financial advice for 30 years. A Bridges financial planner will develop a plan specifically for you; one that’s tailored to your needs and circumstances to help you achieve your goals. To make an appointment with a Bridges financial planner, call 02 6384 1111. The initial consultation is complimentary and obligation free.

Bridges Financial Services Pty Ltd (Bridges). ABN 60 003 474 977. ASX Participant. AFSL 240837.

This is general advice only and has been prepared without taking into account your particular objectives, financial situation and needs. Before making an investment decision based on this information, you should assess your own circumstances or consult a financial planner or a registered tax agent.

Examples are illustrative only and are subject to the assumptions and qualifications disclosed.

Part of the IOOF group

In referring customers to Bridges, South West Slopes Credit Union does not accept responsibility for any acts, omissions or advice of Bridges and its authorised representatives.

Scam Alert

Written by Tahlia Johnson

We have been advised of scam calls being made to our external fraud department’s cardholders, which means SWSCU members could be affected. More specifically, scam callers have been identifying themselves as the “Fraud Department”, “Visa Fraud Monitoring team” and “Fraud team in Collins Street Melbourne” in an attempt to coerce a member to provide their personal, card number and transactional information.

Please be aware that our external fraud department will never attempt to confirm the full 16 digit card number on an outbound call to a member. A genuine call from the fraud department will only ever ask to confirm the last 4 digits of the card.

Although the fraud department require limited member information to confirm high risk transactions, the fraud department will always encourage a customer to contact either their relevant customer service team or the phone number printed on the back of the customer’s card, if they are ever unsure or uncomfortable with the legitimacy of the call.

Please contact us on 02 6384 1111 if you believe you have had a call like this or if you have provided your card details over the phone to someone claiming to be from SWSCU.

Helping Your Adult Kids Be Financially Savvy

Written by Hannah Oliver

It is human nature for parents to want to provide for their children but at some point, the “help” you may be giving them could actually be more of a hindrance to them gaining their own financial independence - stunting their financial literacy and growth.

Your financial future is at stake

The other consideration is your retirement lifestyle. If you are 50 or older, now is the time to be setting yourself up for the future and making the most of every discretionary dollar for the development of your nest egg. If you are operating the “bank of mum and dad” for your kids instead of building your retirement, it could mean you need to work longer or compromise your retirement lifestyle.

Helping them become financially savvy

So, what can you do to help your kids get a grip on their situation and gain financial responsibility?

You can give your children positive encouragement and tangible education on the financial life skills they will need. This doesn’t mean you should suddenly “cut them off”, but it does mean you need to begin a serious discussion with them about the costs of maintaining their lifestyle and determine a timeline for passing over responsibility to them.

Budgeting is the foundation

If you have been putting food on the table and a roof over their head, chances are their income has been directed toward spending on their own entertainment and enjoyment. Giving them an understanding of budgeting is critical for them to gain a broader view of what it takes to survive and prosper financially.

Fortunately, there are plenty of budgeting tools available online or through banks, which you can encourage them to use and help them to complete. This will give them an understanding of the scope and scale of spending required to live independently, as well as an appreciation of the differences between essential living expenses (such as food, utilities, communication, transport, and rent) and discretionary spending (such as eating out, entertainment, gaming, and hobbies).

Developing responsible habits

An extension of the budgeting process is to educate them on the vital importance of saving regularly from their income. Start with a simple rule of saving a set percentage of everything they earn. This can then be developed into goal-oriented saving for various objectives they consider important and worth sacrificing for.

If you do want to provide some form of financial support, rather than giving random handouts toward immediate needs, perhaps you can offer to match their savings dollar for dollar in support of something worthwhile, such as a home deposit, rental bond, or a business venture. This gives real incentive to form solid saving habits that will benefit them throughout their life.

Educating on credit is also essential as it is easy for them to quickly rack up personal debts that can demoralise them and distort their financial priorities. Analysing a month’s spending may point out where their income is being squandered or wasted.

Creating wealth slowly

Your children may view the concept of creating financial independence as something that can only happen through outrageous luck or taking huge risks for quick gain. Therefore, one of the most vital lessons you can pass on is the value and importance of creating wealth slowly.

Real financial independence is not the result of a lottery win or riding the back of an investment boom — rather it is the result of forming sound investment practices such as:

• Allocating a certain proportion of your regular savings toward long-term wealth creation plans
• Utilising available tools that accelerate wealth, such as superannuation tax incentives
• Diversifying investments beyond bank term deposits and into a variety of asset classes that relate to your investment time horizons
• Planning for contingencies (such as sudden loss of income or emergency expenses) by establishing an emergency savings plan and personal insurance protection plans
• Seeking the advice of a financial adviser to coordinate all of the above, and to develop a lifelong plan and strategy for wealth creation.

Start the conversation now

Delaying the steps outlined here may result in an ongoing cycle of dependence that will only become harder to break if it isn’t addressed.

Take the next step

To discuss your financial situation, make an appointment with a Bridges financial planner. We have an established alliance with Bridges, to provide our customers with financial advice. Bridges has been helping Australians with financial advice for 30 years. A Bridges financial planner will develop a plan specifically for you; one that’s tailored to your needs and circumstances to help you achieve your goals. To make an appointment with a Bridges financial planner, call 02 6384 1111. The initial consultation is complimentary and obligation free.

Bridges Financial Services Pty Ltd (Bridges). ABN 60 003 474 977. ASX Participant. AFSL 240837.

This is general advice only and has been prepared without taking into account your particular objectives, financial situation and needs. Before making an investment decision based on this information, you should assess your own circumstances or consult a financial planner or a registered tax agent.

Examples are illustrative only and are subject to the assumptions and qualifications disclosed.

Part of the IOOF group

In referring customers to Bridges, South West Slopes Credit Union Ltd does not accept responsibility for any acts, omissions or advice of Bridges and its authorised representatives.

OSKO Maintenance

Written by Brady Kenny

SWSCU is excited to be upgrading our OSKO platform. The update will allow us to receive instant payments to our BSB and Account Number (that is the full 9 digit Account Number). The change will take place overnight on Nov 20 and as such our existing OSKO service will be unavailable from midnight to 4am, however the update will mean all our members can enjoy the benefits of instant payments. Please always remember to give your Account Number rather than your Member Number when providing bank details to others as this is the best way to receive money into your account. You can find your Account Number on your statement, online in your internet banking or through the SWSCU app.

Please feel free to contact us on 02 6384 1111 if you would like help finding your Account Number.

Please see some answers to frequently asked questions below

What is OSKO and PayID?

OSKO is part of the New Payments Platform that allows payments between participating banks instantly. SWSCU was proud to be one of the first banks in Australia to join the new platform back in February 2018. PayID can be a mobile number or email that is linked to your account allowing people to make payments to you without needing your BSB and Account Number. PayID is also more secure and accurate as it allows the payer to verify they are paying the correct person before they complete the payment.

What is being updated?

This update will allow us to receive OSKO payments to our BSB and Account Numbers in addition to PayIDs. This will mean more payments will be instantly received by our members.

My payments are being rejected?

If payments into your account are being rejected by other banks, please check they are using our BSB 802-367 and your Account Number. Remember your Account Number is 9 digits long and is unique to every account. The OSKO or instant payments platform will not allow payments to your Member Number so please ensure you have provided the correct details to people needing to pay into your account.

Should I update regular payers?

If you wish to receive your regular payments like wages or government payments instantly remember to ensure they have your correct banking details, including BSB and Account Number. If payers are still using your Member Number payments into your account may be delayed or even rejected.

When will the change happen?

The new update is being install overnight on Wednesday Nov 20 early hours of Thursday Nov 21. During this time the OSKO will be offline however you can still make regular payments through internet banking and the SWSCU app.