What to take from the latest ATO SMSF statistics

Last week saw the release the ATO’s SMSF quarterly statistics (September 2012) which again showed strong growth in fund establishments.  A further 8,183 new funds were setup in the first quarter of 2012-13 financial year, taking the number of SMSFs to 488,576.  Total assets grew to more than $458 billion, which now shows the average SMSF assets at $938,341.

Whilst the continued growth in numbers and dollars of SMSFs continues to be the main story, there were a couple of things I found in my analysis that I thought were interesting and worth highlighting:

Member numbers per fund

Average members per SMSF

Commonly referred to as “Mum and Dad” funds, we know that SMSFs typically operate with an average of just under two members (two member funds represent about 70% of all SMSFs).  With less than 4% of all SMSFs having three or four members, it is interesting to note that there were 2.27 members per fund established for the September 2012 quarter, well above the industry average (1.91 member per fund).  This higher than average number for September does not appear to be a ‘one-off’, as you can see from the above chart – on four occasions since 2008, the September quarter has had establishments where (on average) more than 2 members per fund exist.

Why is it the case?  Good question!!  What do you think?

Are SMSF trustees really switching to property?

Asset allocation percentages

There’s been a lot of talk about the growing interest in property within SMSFs… enough to raise the eyebrows of both ASIC and the ATO, ensuring that trustees are considering all the risks of property investment and the broader issues of the fund’s investment strategy.

The September 2012 quarterly statistics showed growth in property with:

  • Business Real Property (commercial) growing to more than $53 billion (9.45% increase over last 12 months); and
  • Residential property growing to $16.25 billion (9.45%  increase also over last 12 months)

Whilst showing signs of growth, these statistics do not appear to be showing any dramatic shift of trustees moving heavily into property.  In contrast the last 12 months has seen the total assets in listed shares grow by 19.6%, and is again the largest asset held within SMSFs by asset allocation ($141.5 billion).

The acquisition of property using limited recourse borrowing arrangements (LRBAs) also remains quite low statistically as the ‘derivatives and instalment warrants’ label represent only 0.34% of September 2012.  This would also include other forms of derivatives including options, warrants and similar instruments (NB.  ATO requires SMSF trustees to report LRBAs under the ‘derivatives’ label, now LRBA label for reporting purposes within the SMSF Annual Return).  Whether the reporting is done correctly or not, it must be questioned whether much of the property talk in SMSFs is just that… talk!

I’d be interested to hear your views about the latest SMSF statistics – where numbers are heading, what about asset allocations?

You can find out more about the ATO’s SMSF quarterly statistics here.


INFOGRAPHIC: ATO releases SMSF statistics for June 2012

The ATO has published the June 2012 quarterly statistics on the self managed super fund market, with figures showing further growth in the sector with 7,197 new fund established for the quarter, taking the total number of SMSFs to 478,263.   The average fund balance has grown to $917,895, with $439 billion of assets, the largest segment of the $1.4 trillion superannuation sector (representing 31.37%).

With fund assets continuing to grow, it is interesting to note that cash and deposits for the first time since June 2009 represented the largest asset allocation with 30.55%, followed by listed shares at 29.91%.  Given the market uncertainty, this larger exposure to cash and deposits may reflect a loss of trustee confidence in the financial markets.  Property within SMSFs has continued to grow, now representing 15.12% of fund assets, up from 12.79% in June 2008.  This is more than $25 billion of additional property investment now residing within SMSFs.

There has been a lot of discussion in recent times about younger entrants to the SMSF market and the June 2012 statistics continue to support this growth, with 34.1% of new members being under the age of 45 years.  This greater level of engagement with their superannuation earlier makes for an interesting challenge in how to deliver advice and attract these individuals to your business.

I have created an interactive infographic that provides a visual overview of some of the key ATO SMSF statistics.

View infographic

Infographic of March 2012 SMSF statistics

The Australian Taxation Office publishes a quarterly statistical report of Self Managed Super Funds.  The March quarter again showed strong signs of growth, with an additional 7,152 new establishments, taking the total establishments to 35,868 for the last 12 months.  This growth was coupled with positive share market data, which improved the total fund assets to more than $416 billion.

Take a look at the infographic to understand some of the other important data released from the March 2012 SMSF statistics.

Has the Government stemmed the flow of SMSFs?

The latest quarterly SMSF statistics released by the Australian Taxation Office for the December 2011 quarter show some slowing in the growth of the self managed super fund market.  The question must be asked:

  • is this a result of SMSFs reaching saturation point; or
  • is it a result of the lack of Government direction and loss of consumer confidence in retirement savings policy?

The latter issue around loss of confidence in superannuation and investment markets was a key theme addressed in the SPAA/Russell research conducted, which produced the annual “2012 Intimate with SMSFs” report.

New establishments for the December quarter were 5,915, the lowest number of setups since statistics have been published on the ATO website (back to June 2008).  On an annualised basis, the 2011 calendar year saw 33,114 new funds established, more than 5% more than the previous year.  When looking at net establishments, this percentage is significantly higher (67% net growth) as we have seen 2,769 funds wound up during 2011.

Total fund assets is again around the $400 billion mark, with growth in both cash held by SMSF trustees and listed shares – the growth in shares may have been a combination of ASX movement and some trustees seeing ‘value’ in the market, both from a growth and yield perspective.

Not surprisingly, we are seeing the most growth in assets in Western Australia, 10.4% of total assets – up from 8.8% back in June 2004.  It doesn’t seem like much, but when the industry was $127 billion in 2004, this represented $11 billion, today this amount is more than $41.6 billion.

The data on younger entrants was still fairly strong for the quarter, 35.1% of new members were under the age of 45.  As I have previously raised in my both presentation at the SPAA conference and also on my blog, many advisers will need to re-think how to deliver education and advice to a younger, more engaged, and web-savvy group of SMSF members.  The scaled advice opportunity in my view presents an exciting time ahead for the SMSF industry.

Details of the December 2011 quarter SMSF statistics can be found here, http://www.ato.gov.au/superfunds/content.aspx?menuid=0&doc=/content/00309172.htm&page=1&H1

These latest growth statistics may just be a ‘blip’ on the radar, so we will continue to watch these SMSF statistics with great interest.

I would be interested in your thoughts whether you think these statistics are a result of SMSFs having peaked or a consumer confidence dropping due to Government using superannuation as a political football?

New ATO Statistical Overview released… good for the industry, but more to be done

The ATO Statistical Overview shows SMSFs growing from strength-to-strength, however more statistical information is required to better understand behaviour of trustees/members

As previously announced over a month ago on thedunnthing blog, the Australian Taxation Office has yesterday released an updated statistical overview into Self Managed Super Funds for the 2008-09 financial year. This report is an update to the Statistical Summary prepared on the request of Jeremy Cooper, Chair of the Super System Review.  He used this report as part of Phase Three to debunk many of the myths surrounding SMSFs and ultimately conclude that the SMSF sector was in fairly good shape.

A recommendation of the Stronger Super reforms is to improve the statistical information available of SMSFs to better understand the sector.  The ATO as Regulator is in the best position to provide this reporting through the information they gather each year in the SMSF Annual Return and fund establishment process.

This report provides us with a greater insight into SMSFs than the quarterly statistics issued on SMSFs, so the updated report is well overdue for the industry.  However in my view it needs to be expanded further to better understand all the elements within the SMSF life-cycle.  Unfortunately, with the need for greater statistics comes the need for trustees and SMSF service providers to collate and report this information.  The issue of cost in improving this statistical data is a potential impairment for the Government.

There has already been some positive talk from this statistical overview about the sector’s growth, both in the number of funds and also in total super assets.  SMSFs have moved from being a retirement vehicle for baby boomers to a retirement vehicle of choice for those individuals who wish to become ‘engaged’ in their superannuation savings.  As a result, we are seeing significant growth in the 35-54 age demographic setting up SMSFs.  This is in my view a collective of factors including greater engagement, coupled with improved financial literacy, greater investment choice (including the ability to leverage investments), along with the having an adaptable retirement savings vehicle that moves as individuals move employment.

Disappointingly from these statistics, we see no break down in the contributions, in particular member contributions that are provided as off-market or in-specie asset transfers?  This information is readily available within the SMSF Annual Return.  By not providing this information, I believe it has impacted the ability for the SMSF industry to put forward a valid argument on the Stronger Super reforms recommendation to remove listed shares from related parties exception (s.66, SISA) from 1 July 2012.  The reality is the Government has responded to a Cooper Review recommendation to ban off market transfer of listed shares on ‘hear-say’ stories of the industry (whether true or not).   In my view, I think it would be valuable to not only look at contributions to SMSFs at a macro-level, but also understand how these contributions got into the fund, e.g. as business real property or listed shares transfers.

The statistical report also shows the continued growth in SMSF net flows (total contributions and benefit payments).  The statistics support that not only did the Simpler Super reforms provide an incentive to get money into super, but the draw down benefits (in particular post-60) have meant we are seeing a growing percentage in the benefit payments taken each year.  The popularity of Transition to Retirement would also be attributing to the increase in benefit payments.  However, a macro-view is taken to benefit payments, rather than providing information on how these benefits are being withdrawn, either as lump sum or via income stream (such as account based pension).  I believe, providing greater information in this area will help the industry and Government better understand the direction retirement income stream policy needs to be taken in the future.  It would be good to be able to identify whether on average, members are ‘living beyond their means’ and how that will influence how long their money will last against average life expectancy, etc…  The issue of longevity risk would be the number one emerging issue in superannuation right now.

A few other areas of note from the statistical overview:

  • It staggers me than only one in every ten new SMSFs established are within a corporate trustee;
  • SMSFs whilst growing in the area post-retirement benefits, very few establish funds and commence income streams immediately (only 11%).  49% of funds commencing pensions within 2009, had been in existence for 5 or more years;
  • The concept of a ‘family fund’ doesn’t appear to be gaining traction… only 4% of funds have 3 or 4 members;
  • The entry point for SMSFs appears dropping in more recent times.  Growth has occurred in all ranges up to $500k.  This may be due to performance dissatisfaction as a result of financial markets – historically the number of new SMSFs have grown in poor financial markets.  Conversely, there has been an asset size decline in member balances >$500k.  This will have come about from a variety of reasons including the impact of GFC coupled with an increasing trend in benefit payments; and
  • SMSF Trustees appear to have taken an active response to their investment strategy as a result of the GFC, with a move to cash and term deposits.  Holding of real property has also grown which would incorporate the law changes to allow limited recourse borrowing from 24 September 2007;  It will be interesting to see in future data, when SMSF trustees look make that shift back into listed equities;
I will provide a detailed analysis on the impact of SMSF service providers in this report in the coming days… these statistics on tax agents, and auditors are quite interesting when looking at a fund’s overall operating expenses.  I’ll be providing my thoughts and views on this area, in particular the evolving role that technology (and greater competition) is appearing to play.

View the ATO Statistical Overview 2008-09.

(C) The SMSF Academy 2012
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