There should be no statutory safety net in place for self-managed super funds (SMSFs) when it comes to fraud and theft, according to Challenger chairman for retirement income, Jeremy Cooper.
Addressing the Australian Securities and Investments Commission Annual Conference yesterday, Cooper said a core trade-off in choosing an SMSF was taking the responsibility for the wins and losses.
"You cannot have your cake and eat it too," Cooper said.
"I am very strongly of the view that there should not be an equivalent to Part 23 of the Superannuation Industry (Supervision) Act 1993 for SMSFs," he added.
"There are plenty of the Australian Prudential Regulation Authority (APRA)-regulated funds, including small APRA funds, for people who aren't comfortable with that [SMSF] setting."
However, Cooper expressed concerns about the rapidly growing SMSF sector and the resulting change in demographics.
He said SMSF members are typically older, wealthier and more financially literate than the rest of the population, and rely heavily on advisers or make sure they seek a second opinion when it comes to investment decisions.
"All of these factors have tended to mean that they are better equipped to handle money decisions than the general population; but there is a limit to this," he said.
"It's the law of large numbers," Cooper added. "As the size of the SMSF population increases, then its characteristics will become indistinguishable from the general population.
"Many experts, particularly in overseas jurisdictions, would raise their eyebrows about a system where the whole population could self-direct or self-invest their retirement savings."
