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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 funds?
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 what type of people choose to run their own fund?
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 25% of the $3.3 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 $706,258. While lower than the average balance of $844,474 for men, women are gradually closing the gap.
Almost 70% of SMSFs have two members, typically an older married couple; 23.7% have one member while only 3.4% have three members and 3.6% have four. 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 the current make-up of funds would indicate there may not be much demand.
Age and gender distribution
The age ranges and genders of SMSF members at the end of June 2021 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 60, which has crept up a little as the baby boomers move into retirement. There has been a further slight decline in the percentage of members in all but two age brackets below age 70 (two were steady), and an increase in those aged 70 and over in the latest statistics.
The gender of members is also fairly evenly split, at 53% male and 47% female.
Age and gender profile of SMSF members: All members
| Age ranges | Total members | Male members | Female members |
|---|---|---|---|
| Under 25 | 0.5% | 0.5% | 0.5% |
| 25–34 | 2.8% | 2.8% | 2.8% |
| 35–44 | 10.4% | 11.0% | 10.7% |
| 45–49 | 9.0% | 9.6% | 9.3% |
| 50–54 | 10.9% | 11.8% | 11.3% |
| 55–59 | 12.1% | 12.7% | 12.4% |
| 60–64 | 12.8% | 13.4% | 13.1% |
| 65–69 | 12.3% | 12.9% | 12.6% |
| 70–74 | 12.4% | 12.2% | 12.3% |
| 75–84 | 13.7% | 11.3% | 12.6% |
| 85+ | 3.1% | 1.9% | 2.5% |
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.
In an encouraging sign, women are starting their own SMSFs at a faster rate than men in all age groups between 25 and 44. Overall, 56% of new members are men and 44% are women. The following table reveals the age and gender of members of SMSFs established in the June quarter of 2021.
Age and gender profile of new SMSF members
| Age ranges | Total members | Male | Female |
|---|---|---|---|
| Under 25 | 1.1% | 1.0% | 1.2% |
| 25–34 | 10.0% | 9.4% | 10.7% |
| 35–44 | 34.3% | 34.0% | 34.6% |
| 45–49 | 18.5% | 18.6% | 18.3% |
| 50–54 | 15.3% | 15.3% | 15.2% |
| 55–59 | 10.6% | 11.0% | 10.2% |
| 60–64 | 6.0% | 6.3% | 5.7% |
| 65–69 | 2.8% | 2.8% | 2.7% |
| 70–74 | 0.9% | 0.9% | 0.9% |
| 75–84 | 0.3% | 0.4% | 0.2% |
| 85+ | 0.2% | 0.2% | 0.2% |
Source: Australian Taxation Office
Member income ranges
The following table provides information on the income ranges of people who were SMSF members at the end of June 2021, based on the member’s most recently lodged personal tax return.
| Income ranges | Male | Female | Total |
|---|---|---|---|
| $0 to $20,000 | 20.3% | 26.0% | 23.0% |
| $20,000 to $40,000 | 15.4% | 20.0% | 17.5% |
| $40,000 to $60,000 | 10.2% | 13.5% | 11.7% |
| $60,000 to $80,000 | 9.2% | 9.8% | 9.5% |
| $80,000 to $100,000 | 9.3% | 8.6% | 9.0% |
| $100,000 to $150,000 | 13.5% | 9.3% | 11.5% |
| $150,000 to $200,000 | 8.4% | 5.3% | 7.0% |
| $200,000 to $500,000 | 8.8% | 4.4% | 6.7% |
| $500,000+ | 2.7% | 1.0% | 1.9% |
Source: Australian Taxation Office
Despite the perception that SMSFs are only for wealthy individuals, more than half of all members earned below $60,000. Significantly more women than men were on these lower incomes, while significantly more men earned more than $80,000.
Superannuation balances
The average account balance of all individual SMSF members according to the latest ATO statistics is $695,757, 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 $414,912. These figures are up 21% and 23% 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.
| Asset ranges per SMSF | 2019–20 | 2018–19 | 2017–18 | 2016–17 | 2015–16 |
|---|---|---|---|---|---|
| $0 to $50,000 | 4.9% | 5.9% | 5.9% | 6.1% | 6.3% |
| $50,000 to $100,000 | 2.7% | 3.1% | 3.4% | 3.8% | 4.3% |
| $100,000 to $200,000 | 6.6% | 7.0% | 7.8% | 8.5% | 9.3% |
| $200,000 to $500,000 | 22.3% | 22.1% | 23.0% | 23.5% | 24.4% |
| $500,000 to $1m | 25.8% | 24.8% | 24.5% | 24.2% | 24.1% |
| $1m to $2m | 20.7% | 20.1% | 19.5% | 19.0% | 18.1% |
| $2m to $5m | 13.4% | 13.2% | 12.5% | 11.9% | 10.9% |
| $5m to $10m | 2.8% | 2.9% | 2.6% | 2.5% | 2.2% |
| $10m to $20m | 0.7% | 0.7% | 0.7% | 0.6% | 0.4% |
| $20m to $50m | 0.1% | 0.1% | 0.1% | 0.1% | 0.1% |
| $50m | <0.1% | <0.1% | <0.1% | <0.1% | <0.1% |
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 20% to 14% in the five years to 2021. Given that the majority of funds have two members, funds with total assets of $500,000 or less fell from 44% to 36% over the same period.
Locations
Australia’s most populous state also has the highest proportion of SMSF members. NSW has 34% of all SMSF members despite having 32% of the nation’s population. Victoria has 30% of SMSF members and 26% of the nation’s population.
On the other hand, Queensland, Western Australia, Tasmania and the Northern Territory are under-represented in terms of SMSF members when compared to their respective shares of Australia’s total population.
The differences between SMSF members in the accumulation and retirement phases
According to Class Super (an SMSF administration software company), at the end of June 2021, 32% of all SMSFs were fully in the retirement phase (previously known as the pension phase) while 52% were fully in accumulation phase. Given that the average fund has two members, typically a married couple who may be in different member phases, a further 16% of funds have a mix of retirement and accumulation accounts. Also, the introduction of the $1.6 million transfer balance cap in July 2017 means some retirees may have money in both accumulation and pension accounts within their SMSF. (The transfer balance cap increased to $1.7 million on 1 July 2021.)
According to Class, the average net assets per SMSF for each member phase was $994,549 in accumulation phase, $2,292,101 in retirement phase and $1,447,466 in a mix of the two.
While mixed phase SMSFs are not the largest SMSF member segment, they do hold significantly more in net assets than those in either accumulation or retirement phase.
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 of $1.6 million ($1.7 million from 1 July 2021) will typically be in mixed phase.
Mixed SMSFs include funds where all members are in retirement phase but some fund assets are held outside of pensions, as well as funds with a mix of accumulation members and pension members. Mixed funds may only have one member if that member has both accumulation and pension balances.
Different types of SMSF members
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. In 2017, CBA and the SMSF Association produced a report that broke down SMSF members into the following four investor profiles:
- 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.
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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