“The benefits of diversification were clearly evident in 2011. Although both Australian shares and international shares fell, by 11% and 5.3% respectively, by being well diversified across a wide range of growth and defensive asset sectors, the loss for the median growth fund was limited to 2%,” explains Chant.

“The same comment applies when we look back over the past five years. This period, which includes both the GFC and the more recent sovereign debt-driven crisis, has been highly unusual in that both Australian and international shares have gone backwards. Yet, by finding alternative sources of return, including unlisted growth assets such as infrastructure, property and private equity, even some growth funds have produced a small positive return.”

Background: Your super fund invests in a mix of asset classes to generate an investment return on your super account, which means that some of your super money is likely to be invested overseas, a fair chunk invested in Australian assets, and a portion squirreled away in cash. The super money of most Australians is invested via a balanced or growth investment option, typically 61-80% of assets are in growth-style assets such as shares, property and alternative investments, and 20-40% are in income-style assets such as cash and fixed interest (bonds). If you choose your own investment option, or you run your own super fund, then you decide on the mix of asset classes for your super savings, including whether you have exposure to international assets, and whether you have exposure to foreign currency movements (that is, unhedged).

Briefly, when a super fund hedges your international investments against movements in the Australian dollar or foreign currency, your investment return is solely based on the merits of the investment rather than the strength or otherwise of the Australian dollar. If your super fund chooses not to hedge your international investments, then the return you may receive on this part of your portfolio may have very little to do with the merits of your investment. I explain the significance of hedging in more detail in my article Ban unhedged international shares in default investment options.

According to figures from rating company, Chant West, the top-performing asset class for the 12 months to 31 December 2011 was Private Equity with a 12-month return of 12.1% closely followed by Australian Bonds (11.4%) and International Bonds (hedged) (10.5%). Coming in fourth was Unlisted Infrastructure (9.6%) and a close fifth was Australian Unlisted Property (9.3%)

The table below sets out the performance figures for 13 asset classes (or sub-categories) for investment periods of 3 months, 6 months, 1 year, 3 years, 5 years, and, if applicable, 7 and 10 years.

Top performing asset classes for 10-year and 5-year periods to 31 December 2011

The top performers among the 13 asset classes (or sub-categories) are different when you look over a longer timeframe. For example, over a 10-year period, International Bonds (hedged) has outperformed all asset classes with an average annual return of 8.2%, followed by Australian Bonds with an annual return of 6.5%, and then Australian shares with an annual return of 6.1%.

Note: Figures over the 10-year and 7-year period to 31 December 2011 don’t include performance statistics for private equity, global listed property (hedged), global listed infrastructure (hedged), Unlisted Australian property, and unlisted infrastructure, due to the relatively recent development of these asset sub-categories.

The devastating effects of the Global Financial Crisis (GFC) can be seen in the 5-year performance figures for the higher risk asset classes, such as shares, listed property and private equity. The top performers over the 5-year period are international bonds (hedged) with an average annual return of 8.7%, followed by Australian bonds (7.4%), Unlisted infrastructure (6.5%), Cash (5.5%) and then Australian unlisted property (5.3%).

Australian shares have delivered a depressing loss of 2.4% a year over the same 5-year period, and international shares (hedged) a pathetic loss of 3.5% a year. Even worse, international shares (unhedged) delivered negative 7.5% every year for the past 5 years, on average, while Australian listed property, that is A-REITs delivered a shocking negative 15.2% every year for the past 5 years. What this means for investors in A-REITs, is that their A-REIT investment is a quarter of what it was worth five years earlier.

Source: Chant West, 23 January 2012 media release (www.chantwest.com.au)

Table notes: The table contains gross investment returns, that is, investment returns before fees and taxes have been deducted. The asset classes and categories listed are the main asset sectors that super funds invest in. Chant West has used market indices for performance figures for all sectors other than private equity and unlisted infrastructure. For those two categories, Chant West has used the returns of a major super fund in the Chant West survey that is representative of those sectors.

Related posts:

1. Asset classes: Naming the investment winners for 2011
2. Super funds deliver 9.2% for 12 months (2010/2011 year)
3. Super funds deliver 10% for 2009/2010 year

The Top 10 performing super funds for the 2011 calendar year (January 2011 to December 2011), and the top 10 super funds for the seven-year period to 31 December 2011 are listed in the tables below.

The performance data is based on Chant West figures, and the table ranking is based on individual investment options offered by a superannuation fund, and the investment options involved in the ranking process look after assets worth more than $500 million.

Note: Based on Chant West’s rankings, a growth fund typically holds between 61% and 80% in growth assets such as shares and property. Some super funds may describe this type of asset allocation as a ‘balanced’ investment option, and this type of investment option is the typical default option for super funds (where you don’t actively choose your investment options for your super account). At least 80% of all super fund members have their superannuation money invested via a growth or balanced investment option. If you don’t actively choose your investment options for your super account, then your retirement savings will be invested in the default option. If you do actively choose your investment option/s then your super savings may be invested in another type of investment option such as conservative or high growth.

Top 10 performing super funds for 12 months to 31 December 2011

The top 10 performing growth super funds consist only of not-for-profit funds (seven industry funds, two public sector funds and one corporate super fund).

Source: Chant West, 23 January 2012 media release (www.chantwest.com.au)

*Performance is net of investment fees and taxes. It does not include administration fees or adviser commissions..

Top 10 performing super funds over 7 years – industry funds win, again

A poor investment performance for one year doesn’t doom you for a poverty-stricken retirement, and likewise a great investment performance for one year does not create a healthy retirement balance many years down the track. What then does this mean for anyone considering whether the super fund they have is the best-performing super fund over the long term?

In 2010, Warren Chant, principal of rating company Chant West, gave some practical advice for super fund members. He said: “From the member’s point of view, I think the message – now more than ever – is to keep an eye on your fund’s performance regularly, and at least every year. Don’t be too concerned if it underperforms in the short term, but if it consistently underperforms over a few years, try to find out why and maybe look at some alternatives.”

Upon the release of the 2011 calendar year results, Chant West reports that the impact of the Global Financial Crisis (GFC) still dominates the medium-term and longer term results. Chant says:

“… there were four negative years out of the [past]19, which averages one year in almost five, so the risk objective was not quite met, but very nearly. Again, though, it’s worth noting that three of the four negative years occurred in the past decade, which included not only the GFC and before that the ‘tech wreck’. In the previous nine years, only one was negative. So when we talk about objectives like ‘a negative return once in every 5 years’, it’s important to remember that we’re talking averages, not a predictable regular occurrence. That’s why you should really look back as far as you can to see the long-term picture and make judgements.”

Industry super funds dominate in Chant West’s table for the top 10 performing super funds over 7 years, although a corporate super fund – CBA OSF Mix 70 – tops the list, with an average annual return over 7 years of 6%.

Note: The cash rate for the same 7-year period is also 5.6%.

Source: Chant West, 23 January 2012 media release (www.chantwest.com.au)

*Performance is net of investment fees and taxes. It does not include administration fees or adviser commissions. The performance data is based on Chant West figures, and the table ranking is based on individual investment options offered by a superannuation fund, and the investment options involved in the ranking process look after assets worth more than $500 million.

Related posts:

1. Top 10 performing super funds for 2010/2011 year
2. Super funds deliver 4.7% for 2010 calendar year
3. Super funds lose 2% for 2011 year (12 months to December 2011)

Looking longer term, the median superannuation growth fund has returned 5.9% each year, on average, for the 3-year period to December 2011. The median growth fund has delivered an unimpressive 0% each year, on average, for the 5-year period to December 2011, and a somewhat disappointing 4.7% each year, on average, for the 10-year period to December 2011, according to Chant West.

Chant West director, Warren Chant believes that medium and long-term returns are still overshadowed by the impact of the global financial crisis (GFC): “… everyone needs to remember that they are dominated by the ‘black swan’ event that was the GFC. That produced a huge negative return of 21.5% in 2008 [for calendar year], which was unprecedented. It drags down the medium- and long-term averages, and will continue to do so for a few years yet.

“To judge whether funds are meeting their objectives, you really need to look to look further back to the introduction of compulsory super in July 1992. … The typical objectives for a growth fund are to beat inflation by 3 to 4% (after investment fees and tax) over rolling five year periods, and to post a negative return no more frequently than one in every 5 or 6 years on average. If we look back over the 19 calendar years since the introduction of compulsory super, we can see that funds have broadly achieved those objectives,” says Chant.

“The annualised return over that period was 7%, the annual CPI increase was 2.7%, so the outperformance averaged 4.3% per annum. So the return target has actually been exceeded over that extended period.”

Based on Chant West’s rankings, a growth fund typically holds between 61% and 80% in growth assets such as shares and property. A median is simply choosing the return for the fund in the middle of the list.

Although the term ‘growth fund’ covers those super funds with investment options having a 61% to 80% allocation to growth assets, some super funds describe the identical asset allocation as ‘balanced’ option. Chant West’s description of ‘balanced’ however is 41% to 60% in growth assets.

The returns for Chant West’s version of ‘balanced’ option are 0.6% for the 12 months to 31 December 2011, and a gain of 1.9% for the 3 months to December. You can find more detail on the investment returns for growth or balanced options in the table below.

The balanced/growth asset allocation is the default option for most large super funds which means that at least 80% of all super fund members have their superannuation money invested via a growth or balanced investment option. If you don’t actively choose your investment options for your super account, then your retirement savings will be invested in the default option.

If you do actively choose your investment option/s then your super savings may be invested in another type of investment option such as conservative or high growth.

The table below lists the performance figures for the five main asset allocations for: 3 months, 6 months, 1 year, 3 years, 5 years, 7 years, and 10 years.

Note: Performance is shown net of investment fees and tax. It does not include administration fees or adviser commissions. Negative returns appear as follows: -2.0% means a loss of 2.0%.

Source: Chant West 23 January 2012 media release (www.chantwest.com.au)

Industry funds outperform retail funds over the long term

According to Chant West, the growth investment options for industry super funds outperformed similar investment options in master trusts/retail super funds for the 12 months to 31 December 2011, with industry funds suffering a loss of -0.7% compared with the larger loss of -3.1% suffered by master trusts/retail funds.

Note: If this discrepancy in returns were to occur over a long period, then a member of a retail super fund would end up with a substantially smaller super benefit than the member of the industry super fund, assuming everything else was equal. Over 10 years to the end of December 2011, industry funds outperformed master trusts by 1.4% per annum, returning 5.3% against 3.9%, according to Chant West.

Chant says: “Industry funds as a group finished slightly ahead of master trusts because they tend to have lower allocations to listed shares and listed property. The corollary is that they also have higher allocations to unlisted assets such as private equity, unlisted property and unlisted infrastructure (20% versus 3%), which performed well for them.

“Over the longer term, the strategic allocation policies of industry funds have served them very well. In particular, those allocations to unlisted assets have added to performance and reduced volatility, or risk. They do mean slightly higher investment costs, but those extra costs have been more than justified by the added benefits.”

Related posts:

1. Super funds lose 5.1% in 3 months (to September 2011)
2. Super funds gain 3.1% for October 2011 (but lose 2.4% for year to date)
3. Super funds deliver 9.2% for 12 months (2010/2011 year)

The ranking on performance can change over time for a particular fund, and the ranking also depends on the particular timeframe that you’re looking at – for example, a super fund many be the top performer for 1 year but not for the previous 3, 5 or 7 years. Some super funds have return history up to 10 or more years. It appears that you have your money in master trusts, so the specific performance will also depend on your investment choices.

We are not a rating company so I can not personally provide the performance ranking of particular super funds but I can point you in the right direction.

The following three websites can assist you with this information (and you can order assessments of your super funds):

• Selecting Super
• Chant West
• Super Ratings

All of these websites will provide detailed ranking information for your super fund for a fee.

Another site is: Morningstar. This is really an adviser site, but if an adviser placed you in these super funds, he or she should be able to provide you with the performance information.

On SuperGuide we have sections entitled Comparing funds and Is my super fund performing? and the article Investment performance: We’re the best super fund. No, we’re the best… may also be of assistance

Related posts:

1. Investment performance: Benchmarking super fund returns
2. Mirror, mirror… what super fund is the best-performing fund of all?
3. Investment performance: We’re the best super fund. No, we’re the best…

We have similar questions to your own on our website that we have published over the past few months, and the links for the most relevant articles are set out below:

• Investment performance: We’re the best super fund. No, we’re the best…
• Investment performance: Benchmarking super fund returns

Within these articles are references to the major rating companies which are good starting points for finding out the allocation to property for each of the major super funds. The articles also provide a link to a document that lists the 200 largest super funds in Australia. You also can click on this link to access the list.

Although I cannot provide you with the property allocation for each of these 200 funds, using the list referred to above, you can do your own research for these super funds by visiting each of the websites for the super funds that you’re interested in. The rating company websites (listed in the article links above) can also provide you with information on asset allocations although you can expect to pay for information outlining the property allocations for the largest super funds.

Related posts:

1. Exposing the performance history of Australia’s largest 200 super funds
2. Property and super: What’s the deal? (12 popular Q & As)
3. Retail funds outperform industry funds in 2009/2010

Thanks for your email. I suggest you phone the ATO SG hotline on 13 10 20 to follow up on this matter.

Some employers are not required to offer choice because a collective agreement is in place, or because an award stipulates that an employer must pay into a certain super fund. The fact that an employer has ‘too many employees’ is not a reason not to offer fund choice.

The SG hotline should be able to help you work out whether you have fund choice, and this link below provides you with some background information.

Related posts:

1. Fund choice: Why won’t my employer contribute to my SMSF?
2. Super for beginners, part 19: My employer has gone broke. What happens to my SG entitlements?
3. Super for beginners, part 18: My employer hasn’t paid my SG. What can I do?

I’m not sure if you’re asking whether you can access your super and deposit it in a bank account, or move your super into a cash investment option within your super fund.

Many super funds offer a cash option but check that the investments are pure cash rather than bonds and other fixed interest items.

The following articles should help you with either question:

• Accessing super early: 12 legal reasons to cash your super
• Super for beginners, part 20: Comparing your super fund’s performance
• Asset classes: Naming the investment winners for the 2011 calendar year
• Investment performance: Benchmarking super fund returns

Related posts:

1. Super for beginners, part 20: Comparing your super fund’s performance
2. THE SOAPBOX: Is your super fund gambling with your retirement savings?
3. Asset classes: Naming the investment winners for 2011

My portfolio looks like heresy when measured against the orthodox modern diversified portfolio designed to manage (volatility) risk, but I believe (and the actuaries agree with me) that my large asset allocation to Australian shares is actually a smart approach to ensuring the money does not run out over a 30-year retirement.

Financial planners and their employers (managed funds), are focused on volatility risk, that is bumpy returns. That is what traders do, but with increased life expectancy, retirees need to be very concerned about longevity risk, that is, the risk that they will run out of money.

Actuaries understand life expectancy and longevity risk. They argue that dividends from Australian shares offer the best protection against longevity risk, precisely because dividends grow faster than inflation.

My point is that with sufficient income, I can sit out any downturn in my SMSF, so falling share prices have no effect on my investment strategy, and anyway, my income depends on company profits and dividends, not prices. As long as I am not selling any assets, volatility is not a risk I need to manage. If I’m in a retail super fund however, I am selling assets (units) every time I take a pension payment, so price volatility is now a big problem, that can only be addressed by adopting a less aggressive and more balanced portfolio (fewer shares) and therefore producing a lower long-term return and which will therefore increase my longevity risk.

Secondly, the amount of capital I need to generate sufficient income is smaller for shares than other asset classes because the yield is so high inside my SMSF. If I can get 7% after-tax yield from my shares inside my SMSF, I only need half the capital to produce the same income than if it is producing only 3.5% after tax and costs (e.g. for a property investment).

So I get to eat my cake and have it too. I get high yield and that income stream is growing faster than inflation.

The problem for retirees is adequate income now and adequate income after 30 years of inflation. You only get at the guts of the retirement problem by getting retirees to focus on the correct risk. With enough income, it is not volatility risk. So the aim of financial planning should be to get people to the point where their capital generates enough income now and it grows over time. Then it does not matter how long they live!

Why $1 million can last forever

If I have $1 million in my SMSF invested in Australian shares with full dividend imputation, I receive about 5% in dividends and another 2% cash refund from the Tax Office as the imputation credits are fully refunded in pension phase. My SMSF thus generates $70,000 per year. (If I have Telstra in my portfolio I can generate 12% income.)

Dividends are linked to profits by a fairly constant pay-out ratio so that dividends increase as company earnings increase. If history is any guide, my dividends grow by an annualised rate of 7 or 8% per year, which is greater than inflation. In other words, if I can manage to live on $70,000 this year, I am better off next year without the need to reinvest any income. I also do not need to sell any shares.

As my income is growing faster than inflation and my capital remains intact, my $1 million must be able to sustain me for as long as I live, and then I can pass the portfolio on to my heirs.

With this strategy, my SMSF portfolio generates about 15% total return, comprised of 7% income and about 8% average growth. I will leave it to you to explain to your readers why your retail super fund can only generate 8% income and growth before inflation.

There is no doubt that the market value of my portfolio will be volatile but my income depends on dividends, not prices. Dividends are far less volatile than share prices. Unlike a retail super fund where each pension payment is the sale of assets (units) at current prices, my income depends on earnings, not sales. Volatility is not a risk I need to manage and therefore I can afford to hold a less conservative portfolio than would be required if I was in a retail super fund that depends on the sale price of assets for each pension payment.

Clearly, if I am not paying exorbitant fess to fund managers, and I am not required to hold a conservative portfolio to safeguard me against the volatility introduced by the active trading of my fund manager who was recommended by my adviser, my $1 million is sufficient to sustain me for ever, or at least until the minimum pension payments exceed the income produced by the SMSF.

At age 85 I can sell some shares to satisfy the minimum pension requirement and repurchase them in another ownership vehicle and the dividend stream continues as before. Eventually, at age 120, the increasing minimum pension payments will remove all my money from the SMSF and ensure that the income from the portfolio is taxed normally.

The tax is higher outside super, so my income then is lower. Given that the growth in income from dividends has exceeded inflation for 25 years there should still be more than adequate income and I should still not need to sacrifice capital to pay for living costs.

My point is that with sufficient income, I can sit out any downturn, so falling share prices have no effect on my investment strategy and anyway my income depends on company profits and dividends, not prices. As long as I am not selling any assets, volatility is not a risk I need to manage.

Related posts:

1. SATO: Cutting seniors tax via super contributions no longer possible
2. SMSF investment: Franked dividends and the 45-day rule
3. SMSFs: Purchasing options is OK, and even sometimes CFDs

The Australian Taxation Office will now regularly share its market intelligence about self-managed super funds (SMSFs), releasing a statistical overview of the SMSF sector in December 2011. The report, which the ATO promises will be updated annually, gives us an insight, albeit a static and historical insight, into the wealth and behaviour of SMSF trustees.

For some SMSF trustees, the ATO findings will simply confirm what we already know about SMSFs based on our own SMSF experience. For many SMSF trustees and service providers however, the ATO report highlights trends in how SMSF trustees invest, how much SMSFs cost to run, and how much money is flowing into SMSFs.

This trend towards ATO transparency began in 2009, when the ATO produced a SMSF statistical summary for the Cooper Review. The 2009 report contained information from both publicly available and previously unpublished ATO data. Two years later, the ATO has updated this earlier statistical summary by producing the report, ‘Self-managed super funds: A statistical overview 2008-2009’. The ATO intends to release another report at the end of next year.

This article is a potted version of the ATO’s latest statistical summary.

What does the ATO think of the report?

As a starting point, the executive summary from the report is set out below:

The SMSF sector remains the largest sector of the Australian superannuation industry, with 99% of the number of funds and over 30% of the $1.23 trillion total super assets.

At 30 June 2010, there were around 425,000 SMSFs and almost $387 billion in assets.2 There were also approximately 810,000 members in the SMSF sector, about 7% of roughly 11.6 million members in Australian super funds.

The data shows the SMSF sector responds to government initiatives or changing economic circumstances, particularly in relation to total asset holdings and shifts in asset types held. This is not inconsistent with the general view that SMSF trustees establish SMSFs for control and flexibility. Such observations take into account that 2010 data is not yet included in the majority of this overview’s analysis.

In recent years there has been a trend for members of new SMSFs to be from younger age groups than those of the total SMSF member population. Overall, SMSF members compared to non-SMSF fund members tend to be older and have both higher average balances and higher average taxable incomes.

SMSFs directly invested 76% of their assets, mainly in cash and term deposits and Australian listed shares (a total of almost 59%). Estimates of the return on assets for the SMSF sector show negative returns for 2007–08 and 2008–09. This is consistent with the total super industry, although the size of the negative returns was smaller for SMSFs. Estimates of the operating expense ratio of SMSFs shows a direct relationship with the asset size of the SMSF.

(page 3, SMSFs – A statistical overview 2008–9)

SMSFs are still the leader of the pack

SMSFs are the fastest growing sector of the Australian super industry for the 5 years to 30 June 2010. During this 5-year period, SMSF assets grew by 122%, while total super assets (including large funds) grew by 60%. The ATO reports that the growth in SMSF assets can be attributed to three factors:

• continued establishment of new SMSFs
• increase in contributions and net rollovers into SMSFs
• investment earnings

For more information on the growth in the SMSF sector see the full ATO report, or check out SuperGuide articles SMSFs lead the super pack, again and Comparing super funds: Who’s who in the super zoo.

Who runs the SMSF show, really?

Individual trustee or corporate trustee? According to the ATO report, around 73% of SMSFs had individual trustees rather than a corporate trustee, as at 31 December 2010. n recent years there has been a shift away from corporate trustees: for the year ended 30 June 2010, almost 90% of newly registered SMSFs had individual trustees.

Accumulation phase or pension phase? Almost 70% of SMSFs reported they were solely in accumulation phase, and just over 30% reported they were making pension payments, for the year ended 30 June 2009. The SMSFs making pension payments (in pension phase) had been established, on average, for at least 5 years.

SMSF approved auditors. More than 11,000 approved auditors were involved in the SMSF sector as at 30 June 2008, conducting 33 audits each on average. In 2009, nearly 40% of SMSF auditors performed less than 5 SMSF audits in 2009, and 15% of auditors were also providing other services for SMSF clients such as tax agent, accountant or administrator.

Tax agents and accountants. Just over 16,000 tax agents and accountants looked after SMSFs as at December 2010, with just over 80% of SMSFS registered with a tax agent, and 98% of annual returns lodged by a tax agent.

How old, and how wealthy, are SMSF trustees?

According to the ATO report, around a quarter(26%)of SMSF members are aged 65 and over, while in the non-SMSF sector only 3% of account holders are over 65. Three quarters of SMSF members are under 65 as at 30 June 2010, and 80% of SMSF trustees are older than 45.

The gender balance of SMSF trustees is 54% male and 46% female, and nearly 70% of SMSFs have two members, and 23% of SMSFs have one member.

In 2009, SMSF members of all ages had a higher average taxable income than non SMSF members.  The average taxable income of all SMSF members in the year ended 30 June 2009 was almost $86,500, compared to non-SMSF members who had an average taxable income of $48,900. SMSF members aged 35 to 49 had an average taxable income of around $110,000 compared to non-SMSF members in the same age group who had an average taxable income of less than $60,000.

Note: At 30 June 2009, the average SMSF member balance was $439,000 which the ATO reports to be almost 20 times the size of the average account balance of non-SMSFs (approximately $22,000).

For more information on the age and wealth profile of SMSF members see the full ATO report, or check out SuperGuide article Do you fit the profile of a ‘typical’ SMSF trustee?

What do DIY super fund trustees invest in?

Nearly 60% of all SMSF assets are invested in 2 asset classes – Australian listed shares (29.2%) and cash and term deposits (29.7%). In the two years ended 2008 and 2009, there was a shift away from listed trusts, other managed investments and listed shares and a move towards cash and term deposits, and direct property (residential and non-residential).

For more information on the types of SMSF investments and the typical asset allocation see the full ATO report, or check out SuperGuide article SMSF investment: Where does all the DIY super money go?

How well do SMSFs perform?

SMSFs outperformed large super funds for the three years ended 30 June 2007, 30 June 2008 and 30 June 2009.

Note: While the methodology used to estimate SMSF performance resembles APRA’s, the data collected is not the same.

How much do SMSFs cost?

About two-thirds (64.5% for 2009) of SMSFs had an estimated operating expense ratio of less than 1%), with more than a third of SMSFs having an expense ratio of less than 0.25%

The average operating expense ratio fell steadily over the three financial years ended 2007 (0.72% or $6,000), 2008 (0.67% or $6,400) and 2009 (0.57% or $5,300).

Note: SMSFs with fund balances of less than $50,000 had a 7% average operating expense ratio compared to SMSFs with fund balances of more than $500,000 with an average expense ratio of less than 1%.

The average SMSF audit fee was $656.23 for the 2009 year, with 50% of SMSFs paying less than $500 and 4% paying more than $2,000.

For more information on SMSF costs see the full ATO report, or check out SuperGuide articles SMSF: How much does a DIY super fund cost? and Super fees: how much should a fund charge you? and Are SMSF audits too expensive?

Related posts:

1. Do you fit the profile of a ‘typical’ SMSF trustee?
2. SMSFs: 15 findings about SMSF trustees
3. SMSF investment: Where does all the DIY super money go?

1. Is there a minimum age for a DIY super fund member?

Q: My son is 16 years and just started work full-time working in administration. Can he become a trustee and member of my DIY fund?

An individual under the age of 18 can be a member of a SMSF, but he can’t be a trustee. Trustees of super funds must be 18 years of age or over. A parent or guardian can be a trustee for a member who is under the age of 18.

You can set up a self-managed super fund (DIY super fund) at any age, although note that individuals are not permitted to make super contributions beyond the age of 74. You can however rollover (transfer) a current super benefit after the age of 74.

If you wish to make further contributions to the SMSF beyond the age of 65, then you must satisfy a work test: working 40 hours in a 30-day period in the financial year in which you intend to contribute.

Related posts:

1. SMSF basics: Can my DIY super fund borrow money?
2. SMSF basics: Can my fund buy my residential investment property?
3. SMSF basics: Wrap vs DIY super

1. Running two DIY super funds

Q: My wife is 58 and retired and she has her own self-managed super fund, where she has rolled over her super funds from various employers. She plans to start her SMSF pension soon. After starting her pension, could she also start another SMSF fund?

A person can have two SMSFs (DIY super funds) if they wish. A more cost-effective option is opening a new accumulation account in the existing SMSF, subject to what the fund’s trust deed permits. You need to be on top of your administration and compliance when running a super fund with both accumulation and pension accounts.

Q: I retired at 55 and I started my Public Sector Superannuation pension. I am now 58. Could I start another super fund, such as a DIY super fund?

The fact that a person is receiving a PSS pension, or is receiving a pension from any other type of super fund, does not stop them from setting up a self-managed super fund (SMSF).

If an individual is aged 65 or over, then he or she must meet a work test before making super contributions to a super fund. Rollovers of existing super benefits are permitted without satisfying a work test (if 65 years or over), although always best to check the implications of losing any entitlements from existing super funds.

If a person is under the age of 65, they can make super contributions to a super fund, for example, setting up a SMSF, without having to satisfy any work tests for making contributions.

Related posts:

1. SMSF basics: Is there a minimum or maximum age for starting a DIY super fund? (2 questions)
2. SMSFs: Taking lump sums from accumulation account
3. SMSFs: What is the proportioning rule?