Younger Australians driving spike in SMSF establishments

One of the key trends identified in this year’s report is the rise in the number of younger Australians setting up SMSFs.

With fewer funds being wound up and more SMSFs being established, SMSFs appear to have regained their popularity, the report stated.

“This is particularly true of younger and more engaged trustees who are choosing SMSFs to make their own investment decisions,” it said.

For the 2021 financial year there were 12,413 net establishments recorded compared with just 233 in the 2018 financial year.

The average age at establishment has fallen from 51 years between 2006 and 2014 to 46 years between 2020 and 2022.

“The 35–44 age group is the most popular in which to establish an SMSF,” the report found.

It also noted there has been a significant spike in fund establishment during the 2022 financial year for funds with balances of less than $50,000.

Commenting within the report, Stake chief executive Matt Leibowitz said while SMSFs may have traditionally been set up by older Australians, there continues to be significant growth in fund establishments among younger, self-directed investors who want more control over their superannuation.

“We’re seeing first-hand that younger people are more active in making decisions relating to their super compared to previous generations of the same age,” said Mr Leibowitz.

“They feel empowered to make their own investing choices for the benefit of their retirement. They have access to more information about SMSFs and the financial markets than ever before. In this digital age, establishing a SMSF to build retirement assets is not as difficult as it once was.”

Mr Leibowitz said he has seen these kinds of trends reflected in the SMSF establishment data from Stake Super.

“Just under 50 per cent of all SMSFs established during FY22 were set up by 35 to 44-year-olds. This is by far the most active age group entering the SMSF industry, and shows that younger investors want more control over their retirement savings and greater flexibility in choosing the type of assets they want to invest in,” he noted.

“In line with that trend, the percentage of SMSF establishments with balances of less than $50,000 has more than doubled from FY21 to FY22, from 11.8 per cent to 31.09 per cent.”

Also commenting in the report, Heffron managing director Meg Heffron noted while the average age of all SMSF members is still around 60, the average age of establishment is one year lower than it was five years ago.

“That’s one statistic where there seems to have been a steady drop over time,” said Ms Heffron.

“If young people are setting them up, the message about how powerful SMSFs can be is clearly getting out well before retirement age.”