A key industry fund organisation has been accused of being a long way off the mark in its criticism of self-managed superannuation funds (SMSFs) including on issues such as asset allocation, residential property investment, tax minimisation and the mental competence of trustees.
Just a day after AMP Limited accused Industry Super Australia (ISA) of misconstruing Australian Prudential Regulation Authority (APRA) data on superannuation fund performance, the Self-managed Independent Superannuation Funds Association (SISFA) has told the Productivity Commission the Australian Institute of Superannuation Trustees (AIST) was wrong in its assertions on SMSFs.
Defending the asset allocation decisions of SMSF trustees, the SISFA submission said the AIST was wrong to suggest that a heavy weighting to cash and term deposits represented a misallocation of capital, arguing that “the relatively conservative approach of SMSF trustees stood them in good stead during the [global financial crisis] GFC when they lost less value than the APRA funds”.
“As the global and Australian economies have improved since then, APRA funds have performed better than SMSFs but the performance trend over five years is similar,” it said.
“It’s important to note that the investment performance of SMSFs reported by the ATO is the average return on assets for half a million self-managed funds,” the SISFA submission said. “This masks a spectrum of performance.”
“In contrast to the large APRA funds where investments and returns are pooled, each self-managed fund has its own investment strategy and asset allocation depending on the risk appetite of the trustees and the changing circumstances of its members as they move through the work and retirement cycle,” it said.
The submission said trustees and members might well be prepared to accept a lower return for lower risk and greater certainty that their superannuation will deliver a retirement income sufficient for their needs, “which they are best placed to judge”.
“The responsibility placed on SMSF trustees is to act in the best interest of their members (generally one and the same) and not to achieve some economic efficiency target set by others,” it said.
Dealing with the AIST’s suggestion that SMSFs were fuelling the property market, the SISFA submission pointed to ATO and industry data suggesting SMSF residential investments were minimal in the context of the overall value of the Australian residential property market.
Responding to the AIST allegation that SMSFs holding $61.7 billion in unlisted trusts represented a clear risk to Government revenue, the SISFA submission pointed to the strict rules and the close oversight of the Australian Taxation Office (ATO)
