The SMSF Association has released a report prepared by the University of Adelaide which has overturned some established SMSF myths. The report was largely in line with the previous findings of Rice Warner but involved a huge sample of over 300,000 funds.
Essentially the report found that ASIC’s view that SMSFs holding less than $500k are uncompetitive when compared with APRA funds is wrong. To those of us who have worked in the SMSF field for years this result comes as no surprise.
The report produced 5 key findings.
- Due to the different methodologies employed by APRA and the ATO in determining fund returns, earning rate comparisons between the two groups understate SMSF returns by around 2%.
- SMSF’s holding more than $200k, that actually invested over a three year period (i.e. did not sit in cash), outperformed APRA funds in two of the three years from 2017 to 2019.
- Unsurprisingly, SMSFs have a much more variable rate of return than APRA funds on an individual basis.
- The more diversified SMSFs produced better returns than those with less diversification indicating the value of financial advice
- APRA returns are more favourable than SMSF’s for balances under $200k. For balances of $200k upwards, SMSFs compare more than favourably.
SMSF Association members have access to the report and helpful summary white papers.
This report dismisses some of the misinformation that has been peddled previously and underlines why SMSFs remain the most popular superannuation alternative for members who can pool their capital to create a combined balance of $200k plus.
