Self Managed Super Funds Pros and Cons in Australia:
One day or another, all of us will have to retire. Life after retirement can be complicated since there is no stable income source. Our savings and investments will be our only option for financial stability. In order to protect Australians from financial struggles in the future, the Australian government ensures superannuation funds for its citizens. In this article, we’re going to discuss self managed super funds pros and cons to help you out!
Self managed super funds can be beneficial for many. However, a lot of people would not benefit from it. So, knowing everything in depth is important before making an investment. So, let’s find out all the details about superannuation and self managed super funds.
What is a super fund?
Super funds, also known as superannuation, are guaranteed payment schemes provided to each Australian citizen once they reach their retirement age. During your working years, your employer will deposit a part of your income to your guaranteed superannuation.
Once you reach your retirement age, you can avail yourself of the money in your super funds and use it. You can choose weekly or monthly payment schemes to receive instalments. Furthermore, you can make additional payments to your super funds, or use the money to invest in ventures like our first house or medical bills.
Generally, your employer manages your super funds. He’ll open your superannuation account through a super provider or a bank and pay your instalments regularly. However, you can also choose the kind of super account for you or get a self managed super fund.
What is a Self Managed Super Fund?
In a self managed super fund, You can take control of your superannuation fund and make all the decisions about it. Here, you act as a trustee to your super, so you can easily make decisions about your super.
When you take a regular superannuation scheme, you have to choose your superannuation provider’s policies and rules. These decisions might not always favour you. However, when we’re discussing self managed super funds pros and cons, one of the biggest advantages is that you’re a trustee to your own funds. As a result, your decisions regarding your money is valued the most.
Types of Self Managed Super Funds:
Self managed super funds can be of two kinds, these include:
Corporate Trustee Super Fund:
You can create a self managed super fund through a company. In that case, the company acts as the trustee for your super funds. All the stakeholders are considered to be directors. They can make necessary decisions regarding the superannuation funds and other technical aspects.
In this case, the company will work based on your decisions, and you won’t have to put in any extra effort.
Individual Trustee:
You can also opt to be an independent trustee along with people you trust. In that case, everyone in the superannuation plan will be considered trustees. You need a minimum of two trustees for a self managed super fund to work like that.
In this case, every decision will be considered a combined decision and affect everyone’s funds accordingly. Also, since no company is a trustee for you, you might need to get yourself involved in matters such as permissions and paperwork.
Self Managed Super Funds Pros and Cons:
Pros:
- Control Over Your Money:
One of the most significant advantages of a self managed super fund is that you have complete control over your money. You can decide what to do with your money without any hassle. This is extremely beneficial if you plan to invest your super funds somewhere. If you plan on making investments with your super funds, you can do it easily if you control them yourself. Furthermore, certain risky decisions aren’t supported by companies that you can take yourself.
- Quick and Easy Decision Making:
You might often need to make certain decisions to better utilize your money. These include investing in specific fields that can give you more profit as well as staying away from certain investments that won’t be useful in the long run.
When you have access to your own super, you can make decisions any time you want without going through a lot of paperwork. However, we recommend consulting a financial advisor before making any decision.
- Lower Management Cost:
According to the Australian Taxation Office, the costs for managing a self managed super fund is only 0.5% of the total cost of the superannuation funds. Which is considerably cheaper than consulting an agency and paying regular fees to keep everything in check.
Furthermore, your management costs reduce as your superannuation funds increase. This means that you will have to pay less if your fund is big or you have multiple trustees in the same fund.
Cons:
- Time Consuming:
Unlike conventional super funds, self manages super funds are very time-consuming. Since you’re the one managing everything, it takes a fair bit of time for you to manage everything. So, it takes longer than company-provided super. So, if you want everything to be fast-paced, self managed super might not be a good idea for you.
- Lack of Government Compensation Schemes:
There are specific government schemes that you’re not eligible for if you self manage your super funds. This is due to the lack of access to dispute regulatory bodies when compared to companies.
So, make sure to look into all the schemes and paperwork before investing in a self managed super fund.
- Involvement of Market Risks:
When discussing self managed super funds pros and cons, you have to take into consideration that your co-trustees might not have a background in finance and tax management. As a result, you might not be able to understand all the paperwork involved. So, make sure you do your research right.
Conclusion:
Your super funds can be your key to a stable retired life. For this reason, managing your super wisely is very important. If you want to manage your superannuation by yourself, you have to know the self managed super pros and cons. We’ve discussed all the technicalities of self managed super in this article. We hope you found this helpful!