Investment strategies, insurance ‘important theme for 2022’

“I think that is a [key] theme for 2022, reviewing the investment strategy and all that that entails,” said Mr Ali.

Mr Ali said it’s important that SMSF trustees revisit the investment strategy to ensure that all the fund’s investments are still fit for purpose.

“Some of the aspects that they may need to consider are things like liquidity and whether the fund can meet its obligations. If the fund is overweight a particular asset class such as property – not that there’s anything wrong with that – in that situation, the trustees need to consider whether the fund has the liquidity to do what it needs to given the fact it is really a retirement vehicle,” Mr Ali explained in a recent SuperConcepts podcast.

“There’s nothing that precludes a fund being overweight in a particular asset such as property, but the trustees need to consider how that overweight position is going to satisfy the firm’s overall objective of providing retirement savings to those members.”

One particularly important aspect of the investment strategy is considering whether the fund needs to hold insurance.

“Australians in general, and particularly younger Australians, are notoriously underinsured when it comes to personal insurance, so things like life insurance or disability insurance. As a nation, we tend to insure our possessions but not the source of income that purchases those possessions being our lives. So that’s very important,” he said.

“If you are in a younger cohort, and there are more and more younger people setting up SMSFs, you need to consider what role insurance can play in securing your retirement benefit. There are some really good options for holding policies of insurance through an SMSF. So this year might be a good time to explore insurance through an SMSF.”

Other factors that may need to be considered, he said, is whether fund members are planning to retire and needs a retirement income stream coming from the fund.

“Is the fund going to be able to pay a pension benefit?” he questioned.

“Or if something very unfortunate happens, is the fund going to be able to pay out a death benefit? You can only pay death benefits in one or two ways – income stream or a lump sum. If the recipients are not eligible for an income stream, because they’re not a spouse or a minor child or an independent adult child, then that lump sum has to come out of the fund.

“Is the fund going to have the ability liquidity to pay out that particular death benefit lump sum?”