Australia’s superannuation system is back in the spotlight.
Recent comments from Prime Minister Anthony Albanese have sparked discussion about the role Australia’s enormous superannuation savings pool could play in the broader economy, including references to the potential of superannuation as a “national asset.”
The discussion has included opportunities for superannuation capital to support Australian businesses, corporate debt, infrastructure and other productive investment.
It’s an interesting policy discussion.
But for everyday Australians, it also provides a timely reason to understand something much closer to home:
How is your super invested — and who makes those investment decisions?
First, let’s clear something up
Calling Australia’s superannuation savings a “national asset” does not mean the Australian Government owns your super.
Nor has the Government announced that it intends to take Australians’ superannuation savings.
Superannuation exists to provide retirement benefits to members and remains subject to Australia’s superannuation and taxation laws.
However, the broader discussion about how Australia’s large pool of retirement savings might contribute to the economy highlights an important distinction between different ways of managing super.
Who decides where your super is invested?
If you’re a member of an industry or retail superannuation fund, you’re generally able to select from the investment options made available by that fund.
Depending on the fund, these might include options such as balanced, growth, conservative, Australian shares, international shares and other investment choices.
The fund’s trustees and investment managers are responsible for the underlying investment decisions within those options.
A Self-Managed Super Fund — or SMSF — operates differently.
Generally, SMSF members are also the trustees of the fund, or directors of its corporate trustee.
That means the trustees take responsibility for the fund’s investment strategy and investment decisions.
Put simply:
An SMSF can provide greater direct involvement in how your retirement savings are invested — but with that control comes significant responsibility.
Does an SMSF protect your super from government policy changes?
No.
And this is an important distinction.
An SMSF does not place your retirement savings outside Australia’s superannuation system.
SMSFs remain subject to Australian superannuation and taxation legislation and are regulated by the Australian Taxation Office.
If Australia’s superannuation laws change, those changes may also affect SMSFs.
So an SMSF should not be viewed as a way of making your super “government-proof.”
The distinction is about investment control and responsibility, not immunity from legislation.
What does greater control actually mean?
SMSF trustees are responsible for developing and reviewing the fund’s investment strategy and making investment decisions within Australia’s superannuation rules.
That can provide considerably more direct involvement in the investment of the fund.
But greater control also brings greater responsibility.
SMSF trustees have important legal obligations.
They need to ensure the fund remains compliant, maintain appropriate records, arrange an annual independent audit, manage the fund’s investment strategy and consider matters such as insurance for members.
Trustees remain legally responsible for their SMSF even when they engage accountants, administrators or other professionals to assist them.
There are also costs involved in establishing and operating an SMSF.
An SMSF isn’t automatically “better” super
That’s another important point.
An SMSF isn’t appropriate for everyone.
Many industry and retail super funds provide a range of investment options, professional investment management, insurance and other services without requiring members to personally take on SMSF trustee responsibilities.
For some Australians, those arrangements may meet their needs.
For others who want greater direct involvement in their superannuation investments and understand the responsibilities involved, an SMSF may be something they want to learn more about.
Neither structure should be chosen simply because of a political headline.
Three questions worth asking
Rather than being alarmed by the current debate, use it as an opportunity to become better informed about your super.
Ask yourself:
Do I know where my super is invested?
Do I understand who makes those investment decisions?
Do I understand the different superannuation structures available to Australians?
The more you understand about your super, the better equipped you are to have informed conversations about your retirement savings.
And that’s where FreedomFFS comes in.
We believe Australians should have access to clear information that helps them understand how SMSFs operate, what’s involved in running one and the responsibilities that come with becoming an SMSF trustee.
Understand your super. Understand your options.
Want to learn more about how Self-Managed Super Funds work?
Learn more with FreedomFFS.
Important information: This information is general in nature and is provided for educational purposes only. It does not take into account your objectives, financial situation or needs and should not be relied upon as personal financial advice. An SMSF may not be suitable for everyone and involves costs, risks and trustee responsibilities. SMSFs remain subject to Australian superannuation and taxation laws. Consider obtaining appropriately licensed financial advice and relevant tax and legal advice before making decisions about your superannuation.