Take outs
- In an SMSF, you are responsible for all aspects of how the fund works
- Public offer funds have a high level of protection
- Each super fund will offer a different level of investment choice
Not all super funds are created equal. But picking the one that best fits your needs can be a difficult process.
We look at some of the main features of public offer super funds and SMSFs. We also highlight some of the key things to consider when picking the right public offer fund.
What are the differences?
1. Compliance and regulation
When investing in a public offer super fund, your super account is one of many grouped under one tax entity. It is professionally managed by a trustee in compliance with super and tax law.
In an SMSF, you are the trustee responsible for all aspects of how the fund works. It’s up to you to ensure that proper records are kept, that your fund is compliant with the relevant regulations and that you have a suitable investment strategy. You must also be capable of dealing with all legal and tax issues.
2. Time obligations
As public offer funds are responsible for looking after your super, you don’t have to prepare tax returns, audits, investment valuations, and you don’t need to stay as up to date with legislation.
As an SMSF owner, these responsibilities fall under your care.
Some people, however, prefer to manage their own pension. They like the investment control an SMSF offers them, and believe that the investments they choose can perform better than a professionally run super fund.
Having access to a broader range of investments can be a common reason people decide to start an SMSF.
3. Protection
Public offer funds have a high level of protection, including compensation, meaning that they suffer a loss because of fraud or theft. Members of these funds also receive free dispute assistance through the Australian Financial Complaints Authority (AFCA).
AFCA has no jurisdiction over SMSFs and the ATO won’t resolve disputes unless they are due to a breach of law.
In order to avoid a dispute between trustees, SMSFs are advised to include a dispute resolution plan in their trust deed. Other dispute resolution methods include mediation or a court hearing in more serious cases.
Winding up your SMSF
With various changes impacting SMSFs, we’ve compiled a guide packed with information to consider if you have an SMSF. Understand the differences between a public offer super fund and SMSF, hear from those who’ve made the switch, understand the tax implications and use our checklist if you’ve decided to wind up your SMSF.
Choosing between public offer super funds
1. Investment control and flexibility
Each super fund will offer a different level of investment choice and it is up to you to make sure you’re comfortable with the level of control available.
Commonly, super funds will dictate the type of investments you’re able to make and place a limit on the percentage of your portfolio you can contribute to a certain investment.
If you want to invest in a certain ETF, stock or managed fund you will need to check its availability and the maximum limit(s) set by the Trustee.
2. Online functionality
Being able to manage and analyse your portfolio is important and you’ll find that each superannuation fund offers different levels of online control and versatility in management tools.
Before making a choice, we advise that you ask for a demonstration to make sure you’re comfortable with managing your online account.
This will give you an insight into what transaction functionality is offered and how you can perform frequent transactions from buying and selling investments, to making withdrawals, updating your pension payments, and analysing transactions and performance reports.
3. Fees and costs
Small differences in investment performance, and fees and costs, can have a substantial impact on your long-term returns. For example, total annual fees and costs equalling 2 per cent of your account balance, rather than 1 per cent, could reduce your final return by up to 20 per cent over a 30-year period (for example, from $100,000 to $80,000).
Each superannuation fund is required to disclose all fees and costs in their product disclosure statement, and you should consider whether investment performance or the provision of better member services justify higher fees and costs.
More on picking the right super fund
If you’ve made the decision to wind up your SMSF and need some assistance, download our guide on Winding up your SMSF the right way.
Further SMSF resources
Learn more about the reasons some people wind up their SMSF, the differences between public offer super funds and SMSFs and read about different account types to suits your stage of life.
The differences between super funds and SMSFs
Depending on where you are in life, there are several types of accounts that could suit your superannuation needs.
If an SMSF is no longer for you, wind it up
SMSFs can be highly advantageous, however there are several reasons that have prompted people to consider leaving their SMSF behind.
Can you take your SMSF overseas?
If you have a SMSF and you're planning to move overseas, there are risks and requirements you need to understand and plan for.
Selecting the right type of account for your stage of life
Depending on where you are in life, there are several types of accounts that could suit your superannuation needs.
Find out more about our super offering
We have account options to suit any stage of your life regardless of where you are in your wealth journey. Take advantage of the range of options in Super Accelerator Plus today.
The information in this article is general in nature. Any financial advice it contains is general advice only and has been prepared without taking into account the objectives, financial situation or needs of any particular person. The article content is not intended to be a substitute for professional advice, so before you act on it you should determine its appropriateness having regard to your particular objectives, financial situation and needs, and seek any professional advice you require. Any reference to a particular investment is not a recommendation to buy, sell or hold the investment. The relevant disclosure document should be obtained from Netwealth and considered before deciding whether to acquire, dispose of, or to continue to hold, an investment in any Netwealth product.
This article contains some of the key considerations in winding up your SMSF and choosing a new account, however as this is a significant decision, it is recommended that you seek personal advice relevant to your individual circumstances and needs.
SMSFs provide features and advantages that may not be available in a normal super fund. It is important that you consider the benefits and the risks of both product types along with the personal needs and circumstances of you and the other SMSF members and seek appropriate advice before you make a decision.