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Thanks to successive Federal Government reforms beginning in the early 1990s, most Australians have a long-term compulsory retirement savings account with attractive tax advantages attached.
In fact, for young people now in the early years of their working lives, their superannuation account may well become their single biggest asset.
However, as every working person is encouraged to put more of their hard-earned cash into these funds to augment the compulsory superannuation levy, they’re becoming increasingly concerned about how the funds are invested.
Dean Ireland from Wilson HTM Investment group says self-managed super funds are becoming increasingly popular.
“Given the flexibility and control offered by super funds there’s been more and more popularity around starting your own fund,” Mr Ireland said.
“There’s now over 370,000 established funds which manage about $300 billion worth of assets, and that’s about 10 per cent of the Australian market. So we expect that to continue.”
However Dean warns that self-managed funds are not for everyone, and require significant thought in terms of both legislation and investment.
“Self-managed super is still an emerging area and there’s still a lot of legislation around. So the two key areas to maintain are compliance and your investments,” he said.
“Compliance is a bit of a hot topic and sometimes can cause a bit of stress.
“It need not be onerous though because you can employ people to administer the fund on your behalf and ensure that it remains compliant.
“With the investment side of things you need that professional financial advice to ensure that the ongoing investments not only meet the needs of the investor but also the legislation.”
In 2007 the Federal Government made more changes to superannuation in Australia, aiming to simplify and streamline the policy.
“They’ve only changed slightly to allow super funds to borrow to invest. This provides super funds with greater flexibility but it also magnifies the need for professional advice in that area,” Mr Ireland said.
If your funds aren’t invested correctly within self-managed super your fund can become non-compliant and you can then be subject to the top marginal tax rates.”
With a large number of superannuation funds invested heavily in the stock market, it’s no surprise that recent market volatility caused some concern within the industry.
Some super fund members saw 20 per cent of their super savings wiped in two short weeks. With this in mind Dean says funds are now looking at more secure investments.
“Self-managed super fund operators have had revisit their investment strategies over the last six months or so.
“We’ve seen a lot of aggressive investment strategies loose some value. So the next big thing for clients will be to return a bit of certainty and a bit of security to their portfolios.
“We’re seeing companies with strong balance sheets good expectations of earnings and low debt are becoming more popular with investors.
“Stocks in the big banks, resource sectors, companies with good yields seem to be where people are concentrating their money from now on.”
Despite recent volatility, Dean says the share market will remain the preferred investment vehicle for super funds.
“The share market is always going to be around for super funds because of those franking credits and the tax effectiveness,” he says.
“Given the superannuation guarantee that’s going to continue, that money has to be invested somewhere and the more and more likely spot is going to be Aussie equities purely because you can get in for a lower amount than you can property.”
In the wake of US economic jitters, Dean reaffirms that the Aussie share market will be the place to be.
“So there seems to be more of a shift towards Aussie equities even away from international shares and property as there seems to be a lot more certainty with the Australian economy going forward than there is the global.”
“So we’re seeing the quality come through with the franking credits and the dividend yields with super,” he said.
In fact, for young people now in the early years of their working lives, their superannuation account may well become their single biggest asset.
However, as every working person is encouraged to put more of their hard-earned cash into these funds to augment the compulsory superannuation levy, they’re becoming increasingly concerned about how the funds are invested.
Dean Ireland from Wilson HTM Investment group says self-managed super funds are becoming increasingly popular.
“Given the flexibility and control offered by super funds there’s been more and more popularity around starting your own fund,” Mr Ireland said.
“There’s now over 370,000 established funds which manage about $300 billion worth of assets, and that’s about 10 per cent of the Australian market. So we expect that to continue.”
However Dean warns that self-managed funds are not for everyone, and require significant thought in terms of both legislation and investment.
“Self-managed super is still an emerging area and there’s still a lot of legislation around. So the two key areas to maintain are compliance and your investments,” he said.
“Compliance is a bit of a hot topic and sometimes can cause a bit of stress.
“It need not be onerous though because you can employ people to administer the fund on your behalf and ensure that it remains compliant.
“With the investment side of things you need that professional financial advice to ensure that the ongoing investments not only meet the needs of the investor but also the legislation.”
In 2007 the Federal Government made more changes to superannuation in Australia, aiming to simplify and streamline the policy.
“They’ve only changed slightly to allow super funds to borrow to invest. This provides super funds with greater flexibility but it also magnifies the need for professional advice in that area,” Mr Ireland said.
If your funds aren’t invested correctly within self-managed super your fund can become non-compliant and you can then be subject to the top marginal tax rates.”
With a large number of superannuation funds invested heavily in the stock market, it’s no surprise that recent market volatility caused some concern within the industry.
Some super fund members saw 20 per cent of their super savings wiped in two short weeks. With this in mind Dean says funds are now looking at more secure investments.
“Self-managed super fund operators have had revisit their investment strategies over the last six months or so.
“We’ve seen a lot of aggressive investment strategies loose some value. So the next big thing for clients will be to return a bit of certainty and a bit of security to their portfolios.
“We’re seeing companies with strong balance sheets good expectations of earnings and low debt are becoming more popular with investors.
“Stocks in the big banks, resource sectors, companies with good yields seem to be where people are concentrating their money from now on.”
Despite recent volatility, Dean says the share market will remain the preferred investment vehicle for super funds.
“The share market is always going to be around for super funds because of those franking credits and the tax effectiveness,” he says.
“Given the superannuation guarantee that’s going to continue, that money has to be invested somewhere and the more and more likely spot is going to be Aussie equities purely because you can get in for a lower amount than you can property.”
In the wake of US economic jitters, Dean reaffirms that the Aussie share market will be the place to be.
“So there seems to be more of a shift towards Aussie equities even away from international shares and property as there seems to be a lot more certainty with the Australian economy going forward than there is the global.”
“So we’re seeing the quality come through with the franking credits and the dividend yields with super,” he said.
