While self-managed super funds (SMSFs) play an important role in the Australian retirement system, they risk becoming too popular to effectively manage, chairman of retirement income at Challenger Jeremy Cooper has warned.
Mr Cooper, who led the federal government’s Cooper Review of the superannuation sector, said the SMSF sector needs to ensure the factors that have made it a success are maintained.
“The reason the self-managed sector works is self-selection,” he said. “SMSFs appeal to people who are generally better off and are used to making money decisions, and they are suitable for those people.
“But as you grow the SMSF sector, it will become indistinguishable from the general population – and the minute you have the general population taking control of their own retirement savings, there is a risk that politicians and policy makers will clamp down on the sector.
“So the fear is that too many people want to be in it, and it loses the characteristics that have made it work so far.”
However, Mr Cooper said overall the outlook is “extremely good,” adding “everything is on the up, the regulator is paying attention and the standards of gatekeepers are rising”.
In response to Mr Cooper’s comments, Michael Hutton, partner at HLB Mann Judd, suggested growth of the SMSF sector may taper off.
“I wouldn’t be surprised if there was a consolidation as there has been in larger super funds. In fact... a consolidation of the number of actual funds,” he said.
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