Australia is already the highest taxing country in all the
OCED countries and soon will have over 20% of its population over the age
of 65. Most of us have come to realise that Self-funded retirement is our
only hope for an enjoyable time in our long retirement years.
Earlier, DIY Super Funds were suitable to only very wealthy
Australians. But now every Australian is considering a DIY Super Fund. Last
year, each working day, over 100 Super Funds were being established.
DIY Super Fund is now a viable alternative / proposition for all Australians because
- Compulsory high (9%) employer contribution to super on current high salary, is forcing every employer to contribute a sizeable amount each year. Thus, compulsory family Super (new money going in super) contributions are being added in thousands of dollars every year.
- Due to compulsory employer Super Contribution since 1992 most fund balances have grown to an amount where DIY Super Fund costs, as compared to the advantages that it has to offer are justified to the whole family. It is not uncommon to find all family members fund balances jointly to be more than $100,000.
- Recent poor returns by publicly offer Super Funds (like AMP, Colonial etc).
- High fees charged by publicly offer Super Funds - Industry average is 2.5% entry fees and 1.5% of fund balance as Management Fees and / or 0.5% Investment fees on fund balance.
Self-Employed people have understood these issues and have adapted to Self Management in large numbers. Many individuals now believe that they can match or better the return offered by publicly offer Super Funds, whilst reducing costs and gaining direct control over investments and by having the flexibility to change their investment mix.
The perception that superannuation monies are locked away without any means of effective control until retirement has long been discarded by Investors keen to manage their DIY Super Fund.
A wide variety of people set up DIY funds with the overwhelming majority believing it is the ideal method of maximising their retirement benefit for both themselves and their families.
Individuals on high incomes and / or successful business operations and / or retirees with large amounts currently invested in superannuation or an ADF, should assess their existing superannuation arrangements as they may be better off having the control and investment flexibility that their own fund would offer.
Briefly, a DIY Super fund is as a pool of assets, such as cash and shares and property that you have total control over. The pool of assets represents the amount of superannuation that you have accumulated over your working life. The assets instead of being in your name are in the name of your DIY Superfund. Your employer could contribute to this pool or you could help it grow by Salary Sacrifice for your retirement years.
Your current super benefits could be where your employer chooses to contribute. There are several types of funds such as
- Publicly offer funds like AMP, Colonial, ING etc
- Industry super fund such as for retail workers REST etc
Your Super Fund should send you annual statements stating
- Opening balance
- Additions (new money - contributions)
-
Income or Loss (addition or deduction)
-
Closing Balance
Fact is that this is your money and you are paying someone to invest it for you. Some funds give you a limited choice in investment decisions, although the fund manager makes most day-to-day decisions. Decisions like what investment to make, when to make, where to make are made for you.
By joining such a fund, you give this decision making right to the fund manager in lieu of management fees to be paid by you.
You may pay an entry fee to join the fund and as an industry average may be paying 1.5% of super balance as management fees to the fund manager. Hence if your family fund balance is $100,000 your family may currently be paying $1,500 or more to various fund managers to look after your money.
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Should you decide to set up your own DIY Super fund all your existing balance can be transferred in your DIY Super funds name and you as trustee can make all the investment decisions. We can assist you in transferring your current balances.
- Once the current balances are rolled over in your fund, you have total control over the funds bank account (you have the cheque book). And can invest the funds as you (as trustee) see fit with the aim of providing retirement benefits for the members of the fund (i.e. you and your family members).
- We simply establish your DIY Superfund and do not manage or have any control over your super benefits.
- To ensure that your DIY Super Fund adheres to the various investment and tax laws and complies with all legislative requirements, you appoint us as administrators who prepare accounts, tax & related returns of your DIY Super fund. We ensure that your fund is a complying fund and is concessionally taxed at all times.
- Investment review
Trustees must review on a regular basis the investments of the fund and implement a strategy, which the Trustees believe will maximise the returns of the fund. Any strategy implemented must be consistent with the investment objectives of the fund.
It is recommended that such a review be conducted:
- whenever the members of the fund change;
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Establishing whether the members need insurance cover e.g. insurance policy for death, to be taken out by the fund ensuring a tax effective payment for the Super fund.