SMSF investors selecting ‘sub-optimal’ cash accounts
SMSF clients may be missing out on thousands of dollars in interest payments by failing to switch to term deposits and savings accounts with more competitive rates of interest, according to analysis by a comparison site.
Comparison site Mozo compared 37 savings accounts and 29 term deposits available for SMSFs and found the difference in interest rates amongst unconditional savings accounts can be as high as 2.1 per cent.
Mozo director Kirsty Lamont said for an SMSF trustee with a cash balance of $200,000, failing to shop around for a better rate could equate to $4,250 in interest lost each year.
“At a higher balance, the shortfall in interest is even greater,” she said.
“Keeping your savings parked in an account with sub-optimal rates could prove a costly mistake and, over time, could mean a huge difference to your fund’s balance and quality of life in retirement.”
For term deposit accounts, the analysis found that between the highest and lowest interest rates, the difference was 1.2 per cent on a five-year term basis.
On a $200,000 investment that could amount to a difference of $12,000 in interest earned over five years, the analysis found.