Tim Steele, CEO of Class, has said an analysis of the most recent data from the Class Annual Benchmark Report shows that, over the past two years, SMSFs have consistently, actively transitioned and remained in pension phase.
“I think this is a really interesting contrast to APRA-regulated funds. The data from APRA-regulated funds shows that those over the age of 65 having established the pension has, in fact, reduced very slightly to FY24,” Steele said.
“[Alternatively] we’re seeing very consistent numbers for those in SMSF that just under 93 per cent have transitioned to retirement phase, and obviously seeking to optimise their retirement outcomes.”
Steele said the most recent data also shows that SMSF members over the age of 65 are also driving the growth of non-concessional contributions at just over 50 per cent based on the data for FY2023.
“This is perhaps not surprising, given the removal of the work test and the continuing increase of non-concessional contribution caps.”
However, Steele noted that non-concessional contributions (NCCs) for those aged 41-65 years decreased by 16 per cent and suggested that the cost-of-living is and has been “biting”, and has impacted the capacity of that age group to make NCCs.
“Obviously, that will have a long-term impact on potential retirement outcomes.”
Steele said one of the more troubling aspects of the recent analysis is that there remains a significant gap within advice and unmet need, particularly for SMSFs.
Data from the Class Annual Benchmark Report indicated that 70 per cent of SMSFs are unadvised, as the gap between supply and demand for financial advice continues to grow.
“We also know the number of trustees accessing financial advice has stayed relatively stable over the past three years,” Steele said.
“So, while accessing advice remains a challenge, increasing productivity for financial professionals through delivering innovative technology solutions presents a significant opportunity for the sector.”
For the 2022–23 financial year, research commissioned by the SMSF Association into SMSF sector performance shows advised SMSF trustees tend to outperform non-advised funds at 7.6 per cent compared with 6.4 per cent (median rate of return).
“[Using the data] we can identify those funds that have an advice fee currently being deducted from it. It doesn’t mean that some funds might not have sought advice potentially upon establishment, or that the trustee may be paying for advice outside of their super but certainly, as a proxy and a consistent benchmark, we looked at those funds that were having the fee deducted, and we’ve seen the number of funds not receiving advice has increased very slightly to just under 73 per cent,” Steele said.
“Interestingly, the number has remained relatively stable, about 15,000 funds receiving advice across our data, but obviously the denominator is that the number of SMSFs continues to increase, [which] means that the number that are receiving advice has actually gone down.”
Peter Burgess, CEO of the SMSF Association, said these results underline the importance of making advice more accessible.
“The research found financial advisers play an important role in bolstering SMSF returns and helping trustees to avoid investment mistakes,” he said.
Sarah Abood, CEO of the Financial Advice Association Australia, said advisers play a critical role in the SMSF sector, with the first question being: does this retirement income structure suit the client?
“There are myriad issues to consider, ranging from the role of business real property, combining family assets, estate planning, and insurance,” Abood said.
