Self-managed super funds (SMSF) continue to grow both in number, and the value of the assets they hold.
According to the latest Australian Tax Office (ATO) statistics for the financial year ended June 2014, show the average SMSF now has $1 million in assets after growth of 23% in the past five years. There are now 557,000 SMSFs, with numbers growing at 27% over the past five years. 32% of them have assets of more than $1 million, although the median balance was $603,000.
Combined, the SMSF sector now holds assets worth $590 billion, roughly 29% of the $2.0 trillion super pool (as the end of June 2014).
The ATO says that while current SMSF members tend to be older than members of Australian Prudential Regulatory Authority (APRA) regulated funds, with higher average balances and higher average taxable incomes. However, the trend continues for members of new SMSFs to be from younger groups. The median age of members in newly formed funds in 2014 fell below 50 years.
Additionally, in March 2015, the Association of Superannuation Funds of Australia (ASFA) found that more than 210,000 Australians had more than $1 million in superannuation, with 140,000 in the SMSF sector.
Perhaps as expected, SMSFs continue to favour Australian-listed shares and cash and term deposits, with 83% of total assets invested in those two asset classes.
No prize for guessing where most of the funds allocated to equities goes.
Yep, most likely the big four banks Australia and New Zealand Banking Group (ASX: ANZ), Commonwealth Bank of Australia (ASX: CBA), National Australia Bank Ltd (ASX: NAB) and Westpac Banking Corp (ASX: WBC), Telstra Corporation Ltd (ASX: TLS) and other large cap, high-yielding shares.
SMSFs with balances of more than $1 million tended to have a higher allocation to equities – suggesting members got more comfortable investing in shares as their portfolio balance increases. More than likely, those funds probably diversify beyond the 'usual' suspects mentioned above.
And despite fears the SMSF sector was investing heavily in negatively geared investment property, just 2.4% of total assets is allocated to residential real property. Just 6.7% of SMSFs have borrowings associated with investment property. The Financial System Inquiry has recommended the government ban SMSFs from borrowing to invest in property.
What is concerning though is the average operating expense ratio of SMSFs in 2014, which increased to 1.06% of assets, and an average value of $11,200. That suggests SMSFs are still paying too much in fees, eating into their returns.
Interestingly, roughly $56.3 billion has been rolled into SMSFs over the past five years.
Foolish takeaway
Research by the Grattan Insitute this year reflects that SMSF members tend to manage their super more actively. Many Australians seem to take virtually no interest in their super – until it's too late to make a meaningful difference. At least those in the SMSF sector are heading for a retirement lifestyle they have planned for.
