More and more people are now choosing to manage their own superannuation with the aim to have greater control and flexibility of where their super is invested. While many people know the benefits of self-managed super, not many know about the disadvantages, which have left some people confused and even losing a lot of their super. Here we look at the disadvantages of do-it-yourself-super (Self-managed superannuation).
High Cost
Self-managed super funds can be expensive! Costs can range from $500 to $2000 a year. You would need to have a pretty large super balance to start with – more than $200k! This is typically the thing that stops most people from changing to a self-managed super. Don’t consider it if your balance is below $200k. The cost will typically outweigh the return on investment
Little Support
This should be obvious based on the name! Since your in control of your super you typically wouldn’t have the vast amount of resources available that all superannuation funds provide. See popular superfund websites such as Australian Super, MLC and Hesta. They pretty much answer any question related to super you can think of and provide all the forms and services needed to manage you super if you choose to do so.
Administration
When setting up a self-managed super fund, you also need to be aware of the additional tasks YOU need to perform. You need to initially setup a trust deed outlining trustee powers, how benefit payments are handled and an exit strategy if the fund is closed. After that you’ll need to keep very clear records of your super, create annual statements, deal with auditing plus more paperwork. Typically, many self-managed super fund owners utilise the services of accountants that are experts in self-managed super funds, assisting in all aspects of the fund’s administration such as paperwork, reporting and support. If you outsource your administration, ensure your accountant complies with superannuation and tax laws! The ATO has rules and requirements in place. Watch out!
So what do you think now? If your still considering a self-managed superfund you should talk to your accountant. If you don’t have one, find one – Specifically one that also specialises in self-managed super. A growing number of accountants provide this service. You could also speak to a financial planner, however it seems most people are choosing their accountants.