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Self-managed super funds (SMSFs) are now firmly embedded in Australia’s superannuation system, so what type of people are attracted to running their own fund?
SMSFs are privately run super funds that can have between one and six members.
At last count, 1.1 million Australians were members. Perhaps you’re one of them or thinking of joining the crowd; but have you ever wondered who is choosing to run their own fund and why?
SMSF member profiles
The most common trait for those deciding to start or join an SMSF is having the motivation to choose and manage their own super investments. But there are differences in the way people go about managing their SMSF investments.
A report by CBA and the SMSF Association broke down SMSF members into the following four investor profiles:
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- The Controller: This is the most common type of SMSF member. They want to have a high degree of control over the management of their fund and investment decision-making. They may seek professional advice, but they are also confident in their own ability to manage their SMSF, especially in relation to investment decisions.
- The Self-directed Investor: This type is less likely to seek professional advice in managing their fund or making investment decisions than a controller. They have a high level of confidence in their own abilities.
- The Coach Seeker: Coach seekers take a moderately active role in managing their SMSF and making investment decisions. They seek professional guidance to help them, but don’t outsource completely.
- The Outsourcer: This type of SMSF member prefers to almost totally outsource day-to-day administration of their fund and investment decision-making to professionals that they hire.
Snapshot of SMSF investors
SMSFs are a popular choice for people who want to take control of their retirement savings. So it’s not surprising that SMSF trustees tend to be more active investors.
While only about 5% of Australians are SMSF members, a recent report found 10% of investors invest through one. The ASX Australian Investor Study 2023 found SMSF investors have significantly higher portfolio balances than non-SMSF investors – with a median of $1.04 million vs $132,000. They also monitor their portfolios frequently – 52% monitor them at least weekly – suggesting they enjoy the investing process or like maintaining control over their investments.
Key characteristics of SMSF investors in the ASX snapshot include:
- 58% say they are diversified compared with 43% of non-SMSF investors, perhaps helped by their higher balances
- 40% prefer stable, reliable returns
- 21% have bought or sold ESG investments in the last 12 months based on environmental issues
- They are more likely to base decisions on professional advice (19%) than non-SMSF investors (12%)
- More likely to use independent information sources, such as online broker websites (33%), company annual reports (28%), newspapers (14%) and paid subscription investing websites (12%) than non-SMSF investors
- 40% of next generation investors (aged 18–24 years) and 28% of wealth accumulators (25–49) who do not have an SMSF are interested in setting one up within two years.
SMSF investors overwhelmingly favour Australian shares (73%). They are also more likely than non-SMSF investors to hold higher levels of listed investment companies (LICs), real estate investment trusts (REITs) and commercial property, perhaps because of their potential tax advantages or their regular, stable income. Conversely, SMSFs are less likely to invest in cryptocurrency (12%) than non-SMSF investors, possible due to the high risk level or compliance burden.
See Where do SMSFs invest below.
SMSF vital statistics
According to the latest Australian Taxation Office (ATO) statistics, the number of SMSF members and funds continues to grow steadily, although the rate of growth has been uneven in recent years as the sector matures and market volatility impacts decision-making.
Collectively, SMSFs hold 24% of the $3.85 trillion in super assets.
Increasingly, those SMSF members are female, especially in younger age groups. At last count, 47% of SMSF members were female with an average balance of $736,000. While lower than the average balance of $867,000 for men, women are gradually closing the gap. Despite having lower incomes on average and hence lower employer contributions, member contributions by women increased by 23% to $48,800 in the year to June 2022, compared with an increase of 21% to $45,000 by men.
Around 68% of SMSFs have two members, typically an older married couple; 25% have one member while only 7% have three or four members. And these percentages have been consistent for many years. Legislation was passed in June 2021 that increased the maximum number of members allowed in an SMSF from four to six. This came into effect from 1 July 2021, but one year later less than 0.2% of funds had five or six members, indicating there may not be much demand.
Where do SMSFs invest?
The choice of investments made by SMSF trustees hold a clue as to why people choose to run their own fund.
According to the ATO, the top five asset classes as a proportion of assets held by SMSFs in 2021–22 were:
- Listed shares – 28%
- Cash and term deposits – 18%
- Unlisted trusts – 12%
- Non-residential real property – 10%
- Limited recourse borrowing arrangement (LRBA, typically used to invest in residential real property) – 7%.
These five asset classes accounted for 75% of all SMSF assets.
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Age and gender distribution
The age ranges and genders of SMSF members at the end of June 2023 were fairly evenly spread between the ages of 35 and 84, as indicated in the table below.
The median age for all SMSF members was 62, which has crept up a little as the Baby Boomers move into retirement.
The gender of members is also fairly evenly split, at 53% male and 47% female.
Age profile of SMSF members: All members
| Age range | All members |
|---|---|
| <25 | 0.5% |
| 25 to 34 | 2.4% |
| 35 to 44 | 10.3% |
| 45 to 49 | 8.6% |
| 50 to 54 | 11.3% |
| 55 to 59 | 11.7% |
| 60 to 64 | 12.7% |
| 65 to 69 | 12.1% |
| 70 to 74 | 11.7% |
| 75 to 84 | 15.1% |
| 85+ | 3.5% |
| Total | 100% |
| Median member age | 62.0 |
Source: Australian Taxation Office
The ATO statistics also reveal that both men and women aged between 35 and 54 have been the most active in terms of recently establishing new SMSFs. The median age for new members is 46.
Age and gender of new SMSF members during March 2024 quarter
| Age ranges | Male | Female | Total |
|---|---|---|---|
| <25 | 1.3% | 1.2% | 1.2% |
| 25–34 | 9.1% | 10.3% | 9.7% |
| 35–44 | 34.5% | 38.7% | 36.4% |
| 45–49 | 18.7% | 17.0% | 17.9% |
| 50–54 | 15.9% | 15.0% | 15.5% |
| 55–59 | 11.2% | 9.4% | 10.4% |
| 60–64 | 5.7% | 5.0% | 5.4% |
| 65–69 | 2.3% | 2.0% | 2.2% |
| 70–74 | 0.8% | 0.8% | 0.8% |
| 75–84 | 0.3% | 0.3% | 0.3% |
| 85+ | 0.1% | 0.3% | 0.2% |
| Total | 100% | 100% | 100% |
| All ages | 55.7% | 44.3% | 100% |
Source: Australian Taxation Office
Members by gender and income ranges
The following table provides information on the income ranges of men and women who were SMSF members at the end of June 2023. As you can see, women were overrepresented in the lower income range while men predominated in higher income ranges, although there are a surprising number of men and women reporting annual taxable income of $20,000 or less.
Members, by gender and income ranges
| Income ranges | Male | Female | Total |
|---|---|---|---|
| $0 to $20,000 | 19.9% | 25.3% | 22.5% |
| >$20,000 to $40,000 | 13.5% | 17.4% | 15.3% |
| >$40,000 to $60,000 | 10.0% | 13.1% | 11.5% |
| >$60,000 to $80,000 | 8.4% | 9.5% | 8.9% |
| >$80,000 to $100,000 | 7.8% | 7.6% | 7.7% |
| >$100,000 to $150,000 | 15.0% | 11.6% | 13.4% |
| >$150,000 to $200,000 | 9.4% | 6.4% | 8.0% |
| >$200,000 to $500,000 | 10.5% | 5.8% | 8.3% |
| >$500,000 | 3.5% | 1.6% | 2.6% |
| Unknown | 1.9% | 1.8% | 1.9% |
| Total | 100% | 100% | 100% |
Source: Australian Taxation Office
Despite the perception that SMSFs are only for wealthy individuals, more than half of all members earned below $80,000.
Superannuation balances
The average account balance of all individual SMSF members according to the latest ATO statistics is $780,254, although this figure is skewed by members with very large balances. The median balance (half of all members have a balance higher and half have a balance lower) is a more modest $467,187. These figures are up 20% and 24% respectively over five years.
The increase in SMSF balances is reflected in a marked fall in the percentage of funds with a balance below $500,000, as you can see in the table below. Conversely, over the past five years there has been an increase in funds with a balance between $500,000 and $20 million.
Proportion of funds, by asset range of fund
| Asset Ranges | 2021–22 | 2020–21 | 2019–20 | 2018–19 | 2017–18 |
|---|---|---|---|---|---|
| $0 to $50,000 | 5.5% | 5.4% | 5.9% | 6.1% | 6.0% |
| >$50,000 to $100,000 | 2.5% | 2.5% | 3.1% | 3.2% | 3.5% |
| >$100,000 to $200,000 | 5.9% | 6.1% | 7.1% | 7.2% | 7.9% |
| >$200,000 to $500,000 | 19.1% | 19.9% | 22.5% | 22.2% | 23.0% |
| >$500,000 to $1m | 25.4% | 24.9% | 25.1% | 24.6% | 24.4% |
| >$1m to $2m | 22.0% | 21.3% | 19.8% | 19.8% | 19.4% |
| >$2m to $5m | 15.2% | 15.1% | 12.8% | 13.0% | 12.3% |
| >$5m to $10m | 3.3% | 3.5% | 2.7% | 2.8% | 2.6% |
| >$10m to $20m | 0.9% | 1.0% | 0.7% | 0.7% | 0.6% |
| >$20m to $50m | 0.2% | 0.2% | 0.2% | 0.1% | 0.1% |
| >$50m | <0.1% | <0.1% | <0.1% | <0.1% | <0.1% |
| Total | 100% | 100% | 100% | 100% | 100% |
Source: Australian Taxation Office
Although it’s generally advised that the cost of setting up and running an SMSF may not be in the best interests of members with a balance of less than $200,000, there is anecdotal evidence that some people establish funds with less in the expectation of increasing their balance fairly quickly.
In any event, the message does seem to be getting through. The proportion of SMSF funds with balances of $200,000 or less fell from 17.4% to 13.9% in the five years to 2021–22.
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The differences between SMSF members in the accumulation and retirement phases
ATO statistics show that at the end of June 2022, 35% of SMSFs were fully in the retirement phase, while 55% were in accumulation phase. The remaining 10% had a mix of accumulation and retirement phase assets.
Following the rule change in July 2017 limiting the amount that can be transferred into a pension account, funds with wealthier pension members with more than the transfer balance cap (currently $1.9 million) will typically be in mixed phase.
Mixed SMSFs include funds where all members are in retirement phase but they choose to keep some of their super in accumulation accounts, as well as funds with a mix of retired and non-retired members. Mixed funds may only have one member if that member has both accumulation and pension balances.
The bottom line
The number of SMSFs in Australia has continued to rise in recent years, along with average individual member and overall fund balances. Another trend is the growing number of women with SMSFs and a tightening of the gap between male and female account balances.
SMSF members are generally attracted by the freedom to choose and manage their own super investments. But there can be significant costs and responsibilities involved with setting up and running an SMSF, so it’s important that the benefits outweigh the costs.
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