According to statistics from the Australian Taxation Office (ATO), based on information available as at June 2008, assets held in SMSFs climbed to $358 billion, largely as a result of Simpler Super. Andrew Bloore, chief executive officer of SMSF administrator Smartsuper, says one of the biggest reasons people get out of other sectors and into SMSFs is to take control of when and how they spend money on their assets. The average administration cost for an SMSF is $2600 per fund, and the average size of an SMSF is $880,000, equating to 0.3 per cent as a percentage of assets.
In addition to that, trustees pay broking fees when they buy and sell investments, and if they are invested in a wholesale managed fund, they pay another 0.7 per cent in fund manager fees. “The SMSF space is probably under the 1 per cent anyway,” Bloore says. “With an SMSF, people tend to go into them once they get to $200,000 or $250,000, and the average establishment of an SMSF is about $250,000. But the average size of an SMSF is about $880,000 so the cost of fees proportional to the account comes down significantly.”
However Rice warns SMSF fees often creep up above 1 per cent, by the time accounting and audit fees are taken into account. “And many of them are invested in cash, and the retail CMTs tend to have a fee of about 1 per cent,” he adds. “So people will tell you that they have an SMSF and it doesn’t cost anything but when you add it all up, unless the fund has half a million or more, typically the fee is 1 per cent or more.” Commissio ns Commissions have long been condemned by industry funds as the bulk of the fat within the super industry.
David Whiteley, executive manager of Industry Super Network, believes that commissions paid on compulsory contributions are “the most egregious example of the conflicts of interest and inappropriate practice in the super industry”. Furthermore, he says the problem is not just the cost of the commission, but the underperformance of the fund being “sold” by the financial adviser. Modelling by Access Economics on behalf of ISN and the Australian Institute of Superannuation Trustees (AIST) revealed that reducing inefficiencies, including commissions, across the superannuation industry could not only reduce charges but boost compulsory super contributions to almost 12 per cent. “What we’re saying is if you increase efficiency across the sector by 0.75 per cent it is roughly equivalent to increasing contributions and in fact it adds revenue to the government whereas increasing Superannuation Guarantee (SG) will cost the government because of the tax concession,” Whiteley says.