In simple terms, a self managed superannuation fund (SMSF) is a small super fund that is managed by its members, with its primary purpose being to provide retirement benefits for its members, or a benefit to their dependants if a member dies before retirement.
In other superannuation funds, such as large retail, corporate or industry funds, there can be thousands of members but they are not the managers of the fund – so they are not responsible for managing the fund's investments or compliance with superannuation law.
SMSFs can provide you with greater control, flexibility, and transparency of your super.
- You control how to invest your superannuation money.
- You have the flexibility to pick and choose from a wider range of investments. These can include direct shares, term deposits, and even property.
- Since you are in control, you can choose to invest directly in shares for companies that you are familiar with or you can work with professionals to build a portfolio of shares that best meets your needs.
- With an SMSF you can view your individual share holdings, see your term deposits, check your cash balance and keep track of rental income from your property.
- You have greater visibility of the assets your super is invested in and how they are performing at any given time.
Running your own super fund means that you can monitor and control almost all of your fund's transactions, which will give you a clearer picture of your fund's running expenses.
And, as many of these expenses may be fixed dollar amounts, the general rule is that the bigger your total fund size, the more cost effective it becomes to run a self managed super fund.
While there is little doubt that an SMSF can provide you with greater control, flexibility, and transparency of your super, it must also be remembered that along with these benefits comes additional risk and complexity.
Self managed super funds are not for everybody.