SMSF v APRA Fund Cost Comparison

25 Nov 2020

Written by

David Busoli, Principal

Rice Warner’s recent report on the comparative costs of running an SMSF versus an APRA fund comprehensively debunks the misleading information that ASIC previously provided to the market. It’s a long and very interesting report but, to summarise;

  • Since 2013, industry fund fees have increased while SMSF fees have decreased
  • SMSFs with balances;
    • less than $50,000 are more expensive than all alternatives.
    • between $50,000 and $100,000, the cheapest SMSFs are cheaper than only the most expensive APRA funds.
    • between $100,000 and $150,000 are only cost competitive if the Trustees use a cheaper service option or undertake some of the administration themselves
    • of $200,000 or more are competitive with both Industry and Retail funds even for full administration
    • between $250,000 to $500,000 become the cheapest alternative provided the Trustees undertake some of the administration, or, if seeking full administration, choose one of the cheaper service options.
    • of $500,000 and above are usually the cheapest alternative:
      • For SMSFs with only accumulation accounts, the fees at all levels are lower than the lowest fees of APRA regulated funds.
      • For SMSFs with pension accounts, only the highest full administration fees exceed the lowest fees of APRA regulated funds.

Essentially the report confirms what we, in the sector, have always known to be true. The fixed fee nature of SMSF administration will always be more competitive, the higher the fund balance, and this consideration kicks in at about $200k. The ability to combine the balances of up to 4 members (soon to be 6) only enhances the cost advantages. Naturally cost is not the only determinant of the suitability of one fund type over another and this report also explores these matters.

It will be interesting to see if ASIC now change their tune. Indeed, having caned the SMSF sector with their previous invalid data, I wonder if they will now turn their attention to the cost disclosure comparisons used by the industry funds.

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