Speaking at a media briefing in Sydney yesterday, Credit Suisse equity strategist Hasan Tevfik said there are a few impediments to economic growth in Australia, of which SMSFs are “the bigger force”.
“One is the institutional investor with his more short-term nature potentially holding back cap ex, and the other one, which is probably the bigger force, is SMSFs,” Mr Tevfik said.
“The SMSFs are feeling wealthier while their kids can’t get jobs,” he said.
Mr Tevfik said a form of ‘ageism’ exists whereby older Australians continue to profit at the expense of younger generations.
“There is a bit of ageism going on here – the older you are, the more likely you are to own assets and you are doing quite well,” he said.
“The younger you are, the harder it is to get a job – and guess what? You don’t actually own many assets.
“You find it hard to get on the property ladder and you find it hard to get a job.”
Mr Tevfik believes that baby boomers holding SMSF assets have become too rich and, as a result, they can afford to retire a few years early.
“Around the world they have done pretty well with these asset returns, so you get this natural attrition in the labour market which means the potential for growth is not going to be as great as what you had previously,” he said.
Mr Tevfik expects to see an increase in SMSFs as balances in APRA-regulated funds get larger.
“It makes sense for a large pension pool to go into an SMSF,” he said. “Also, as the cost of running an SMSF falls, that will also be a driver.”
An unusual quirk in the Australian financial system means that as SMSF trustees enter the pension phase, their equity allocation actually rises due to the lack of a corporate bond market in Australia.
“It’s odd,” Mr Tevfik said. “You reach this pension phase where you are expected to be reaping the rewards of your savings and buying credit, but of course there is no credit market in Australia,” he said.
SMSFs make up a third of total superannuation assets and now own more than 16 per cent of the Australian equity market, Mr Tevfik said.
The boys who like to manage our money for us, leveraging it, risking it and gambling with it – are not happy that we are now taking our assets into our own hands, pure and simple.
They had their chance and blew it, this is why now you see SMSF’s so popular.
Shouldn’t the people who actually own the cash/assets have the right to decide where it’s spent? What makes these people so wise with all their gambling and pathetic returns?
If he had just made the comment in the last couple of paragraphs the article would be more credible. In my experience SMSF trustees in the main are pretty rational – they dont want to lose money. Perhaps if the funds management industry provided better vehicles to generate stable returns, and/or worried less about short term issues, more of the superannuation pool could be put to work generating jobs etc … consider why overseas pension funds have been snapping up so many of our ASX listed etc assets.
My understanding is that many SMSF retirees are looking for safe investment options. Financial repression, however, means that there is not much of this around and as a result many are being force to hold risk assets in the search for yield. In addition to this a lot of money in SMSF has come from a process whereby overtime people spent less than they earned (strange phenomena called saving) and not from sitting around getting rich without effort. Finally, refer to books like Clive Hamiltons Affluenza if you think that the older generation had it easy while the younger people of today are doing it tough. Credit Suisse is promoting the debt model of growth, where conservative savings is bad and we all must either spend or borrow.
I have seen numerous attacks on SMSF over the years but this would have to count as one of the most bizarre. SMSF an impediment to economic growth? How exactly. From what I know neither Spain nor Greece have anything similar to SMSF yet their youth face between 25% to 50% unemployment, no job prospects and little assets. And of course the older you are the more assets you have. That has been around well before SMSF and in other countries that don’t have SMSF. This is the most ridiculous attack on SMSF and should be seen as such.
I can’t see any sense in this at all. But then I never really understood economics in the same way economists seem to. It would seem to me that baby boomers having lots of money = baby boomers spending = more jobs + economic growth.
I’m sure I read that the costs of the aging population will push our Federal debt to 70% of GDP if we do nothing. Meanwhile NSW has estimated health costs will cnosume their entire budget by 2032, QLD by 2030 and Tas by 2025. No doubt other states are in a similar position. So doing nothing will create a massive intergenerational inequity as people not yet born will pay the price. If concepts like this are the gist of the article then its hard to disagree. Without getting into a discussion of who caused it, or who should pay for it, I think just focussing on baby boomers with SMSFs is simplistic. Surely a baby boomer with lots of money in a large fund or invested outside of super is having the same effect as baby boomers with SMSFs. I’m also not sure how baby boomers with lots of assets is able to help the younger generation. A simple solution to the cost of an aging population is to reduce duplication across the states, with estimates of up to $80b every year as the cost.
Now I have read it all. So smsfs are a major impediment to economic growth. Well I guess that the first casualty in the war against smsfs by the vested interests in this country must surely be the truth !