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

Younger SMSF entrants are in for the long haul


There’s been a lot of media in recent times about the growth in younger entrants to the Self Managed Super Fund market.  Much of this discussion has come from the recently updated SMSF statistical summary published by the Australian Taxation Office.

Is this simply a ‘spike’ in the statistics or is it a genuine trend in younger people being attracted to SMSFs?   Let’s have a look at some of these quarterly statistics issued by the ATO since June 2009:

Quarter Ended

Under 45         years of age

30 June 2009

35.5%

30 June 2010

35.0%

30 September 2010

35.6%

31 December 2010

35.2%

31 March 2011

39.1%

30 June 2011

34.1%

30 September 2011

37.6%

As you can see from the table, we are seeing a sustained trend in new SMSF entrants under age 45 years of age.

What do you think are the reasons behind this trend?

  • Is it greater control? or
  • Are people taking a greater interest in their super at a younger age? or
  • Have people changed because they are not satisfied with their previous fund (e.g. performance and/or fees)? or
  • Greater investment opportunities, such as limited recourse borrowing to acquire property? or
  • All of the above!!

Are you a younger SMSF entrant? or are you advising younger SMSF entrants?  I would love to hear stories why individuals are being attracted to SMSFs at a younger age?

PS.  I’ll be presenting on the topic of attracting SMSF business your way at the 2012 SPAA National Conference in Sydney, 15-17 February.  Join me for this session as we explore some of these changing trends and how you can leverage new ideas to build your SMSF business…

SMSFs continue to grow


The SMSF sector continues to grow with no signs of slowing down.

The Australian Taxation Office has released their June 2011 quarterly statistics regarding Self-Managed Super Funds.  These statistics highlight the growing interest by individuals and professionals towards the SMSF industry.

I have outlined below some of the key highlights and analysis from the June 2011 statistics:

  • Net establishments for the June 2011 quarter were 7,402 (7,466 establishments with 64 wind ups), taking the total number of SMSFs to 456,472.
  • The 2010/11 financial reflected net establishments of 32,619 (33,106 establishments with 487 wind ups).  This represents at 37% increase in the number of SMSFs established compared to 2009/10 financial year (net of wind ups).  The number of new SMSFs established for the financial year is the highest since the ‘one-off’ $1m contribution opportunity in 2007.
  • It is interesting to note the significant drop in wind ups of SMSFs. Year-on-year the number of wind ups has been in-excess of 4,000 (up to 7,000 in June 2009).  With only 487 SMSFs wound up for the 2011 financial year, has the rationalisation of SMSFs that are not appropriate for certain individuals now finished (i.e. are current & new trustees better informed than ever before about an SMSF being appropriate for them?)
  • The average SMSF balance is now $916,746, down from the previous quarter average of $926,196.
  • There has been a $3.284 billion increase in cash and deposits for the quarter, representing 27.28% of fund assets to 30 June 2011.  However, this total fund assets within SMSFs have been “whittled away” by the decrease in listed shares (down $3.653 billion for the quarter).  Shares still however lead the way as the largest single asset class (33.30%).
  • The annual statistics (year-on-year) show that High Net Worth SMSFs (balances > $1m) appear have moved back into the share market, with an increase in exposure to listed shares of between 3.26% ($1 – $2m) to 5.33% ($10m+) (NB.  based on annualised statistics only available to 2010.)
  • The statistical breakdown by fund size is showing a significant increase in the number of $1m+ SMSFs.  During the 2010 financial year, 16,360 SMSFs moved into the magical million dollars of fund assets.  By contrast, the number of SMSFs under $200,000 is reducing, with 24.2% of funds now with balances under this figure.  The biggest drops have been in the under $50k and $50-$100k ranges.
  • The strongest growth in SMSF establishments continues to be in the accumulators, with the 45-54 age bracket representing 29.9% of funds established for the quarter and the 35-44 age bracket with 22.7%.
These statistics continue to show strong support in the use of Self-Managed Super Funds as a retirement savings vehicle.  Whilst reductions in concessional contribution caps have stymied the assets available to get into superannuation, it hasn’t reduced the appetite for SMSFs.

10 things about the latest stats on SMSFs


The Australian Taxation Office (ATO) has recently released (2 March 2011) their quarterly SMSF statistics to the end of December 2010.  A lot of attention is directed to these statistics about the continuing growth of the SMSF industry, but what are some of these statistics really telling us about self-managed super funds?

I outlined below 10 key things and my views about the latest statistics from the ATO:

  1. The average fund balance has now grown to $957,248. However, there are still more than a quarter of all SMSFs with balances of less than $200,000.  Conversely, we see a quarter of all SMSFs with more than $1 million.
  2. I predict that by the end of the 2013 calendar year, there will be a one (1) million SMSF members across 530,000 SMSFs.  These numbers are supported by consistent year on year % growth, which will see net establishments each year continue to grow at about 6-6.5% p.a.
  3. The most active growth is happening with SMSF in the range of $200 – $500k. The number of these funds is up 7% from the prior year, 2009 (in terms of the percentage of funds with asset balances in this range).  Whilst markets will have influenced these numbers to an extent, this growth will also be supported by younger entrants to the SMSF market (Gen X, inclusive of the 35-44 age bracket) who are looking for greater choice and control, including with strategies such as borrowing in super.
  4. Interestingly by way of comparison between the 2008 to 2009 financial years, listed shares as an asset range dropped from 34% to 26% of total fund assets.  Whilst market correction (GFC) will have influenced this, it also suggests that many trustees moved to more cautious investment strategy positions of cash and term deposits. To support this theory, cash and deposits increased to 23.22% from 20.25%.  I believe it shows that many trustees do take an “active” role in the management of the SMSFs.
  5. There is growing exposure to both residential and commercial property within SMSFs.  This will have predominantly come from interest levels in limited recourse borrowing arrangements.
  6. There appears to have been a ‘clean out’ of lower balance SMSFs (under $50k).  These funds will have either simply be wound-up (maybe by the ATO where no assets actually ever existed) or further contributions were made into the fund to improve their viability.
  7. There does appear to be new-comers to SMSFs in the $100 – $200k mark.  Many of these people will be likely to pursue direct investing arrangements to make the fund’s operations cost-comparative to an APRA fund (but providing greater choice).
  8. There is a significant decreasing trend in the number of SMSF wind-ups.  The number of wind-ups from 2008 (7,749 funds) to 2009 (3,502) has more than halved. Year-to-date 2010 figures to date suggest a further decline, which only supports the 6 – 6.5% net growth rates predicted above.
  9. Whilst there is a lot of industry-talk about the benefits of a “Family Super Fund” or “Enduring Family Super Fund”, the ATO statistics don’t support this as a concept, with decreasing numbers of funds having 3 or 4 members.  Four member funds now represent only 4.4% of the market.  Whilst these percentage changes are substantial across SMSFs, single member funds are growing to nearly a quarter of all SMSFs (22.8%).  I find this amazing that we having a growing trend in single member funds but a decreasing use of corporate trustees?  There could be many trustees setting themselves up a significant fall at an estate planning level!!
  10. Operating costs to manage SMSFs appear to be relatively constant, which means with growing account balances makes their costs in percentage terms very attractive.  This is likely to be as a result of a range of factors including efficiency gains in delivering the SMSF statutory obligations and more price-sensitive trustees (due to the GFC).

It will be interesting to watch the continued growth and evolving beast that is self-managed super funds…

(C) The SMSF Academy 2012
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