The collapse of the Shield Master Fund and First Guardian Master Fund has affected almost 12,000 Australians and around $1 billion in retirement savings. It is a serious failure and deserves a serious response.
But there is one important fact that seems to be getting lost in the discussion: Shield and First Guardian were not SMSFs.
They were managed investment schemes. That doesn’t mean SMSFs were completely absent from the story. More than $100 million was reportedly invested in the schemes through SMSFs, while other investors accessed them through APRA-regulated superannuation platforms. In many cases, people were contacted by lead generators and referred to financial advisers who recommended moving their super to access these investments.
That distinction matters. The investments that failed were managed investment schemes, not SMSFs themselves. Yet SMSFs are now firmly caught up in the Government’s regulatory response.
So what is changing?
The Government’s reform package includes tougher rules for lead generators, advisers, super trustees and managed investment schemes. It also proposes changes that directly affect SMSFs, including more information being required when an SMSF is established, greater ATO scrutiny of rollovers and an increase in the SMSF supervisory levy.
Some of these changes may help protect people from scams and financial abuse. But it is still fair to ask how the failure of managed investment schemes has become part of the reason for placing greater controls around Australians who choose to manage their own super.
That question becomes even more important when you look at the much bigger debate happening around super.
Australia’s $4.5 trillion super pool
Australia’s super system now holds around $4.5 trillion. Governments are very aware of just how much money that is, and there has been growing discussion about how some of this huge pool of capital could be used to support national priorities.
The Federal Government has openly discussed encouraging super investment into areas such as housing, energy and infrastructure, while saying those investments must still be in members’ best financial interests. The Greens have also pushed for major super reforms for many years, including changes to SMSF borrowing and proposals involving super investment in housing.
There is nothing wrong with super funds investing in Australian housing, infrastructure or other productive assets when those investments genuinely benefit their members. But there is an important difference between what is good for your retirement savings and what is useful for government policy.
Sometimes the two may line up. Sometimes they may not. That is why Australians should be paying close attention to the debate about super, especially when changes are being made in the name of “protecting” members.
It’s your money. Are you paying attention?
For many Australians, super will become one of the largest pools of money they ever have. Yet plenty of us barely look at it until retirement starts getting closer. We know it’s there and might check the balance occasionally, but do we really know where the money is invested, who is making the decisions and how the rules around it are changing?
Perhaps that is the bigger lesson from Shield and First Guardian. We need to start paying attention to our own super. Do you know where your super is invested? Do you know who controls the investment decisions? Have you thought about how much control you want over your own retirement savings?
An SMSF is not right for everyone and comes with important legal, investment and administration responsibilities. But if taking greater responsibility for your super is something you have been thinking about, now is a good time to understand how SMSFs work and what is involved.
Your super is your money for your retirement. Pay attention to it, understand your options and make informed decisions about who you want controlling it.
If you would like to understand what is involved in setting up or transferring an SMSF, talk to the Freedom Financial Solutions team about the establishment, administration and compliance process.
General information only. This article does not take into account your objectives, financial situation or needs and does not constitute financial product advice. Freedom Financial Solutions is not licensed to provide financial product advice. Consider obtaining advice from an appropriately licensed financial adviser before making decisions about your superannuation, investments or investment strategy.