According to Industry Super Australia’s (ISA) paper, ATO self-managed super funds: a statistical overview 2015-2016, until SMSFs contain multimillion-dollar assets, they run the risk of making poor or negative returns.
Marking the release of the report on Monday, ISA argued that while SMSFs with more than $2 million earned a “healthy 4.3 per cent” over the financial year, those with less than $500,000 made between zero per cent for those with assets of $200,000-$500,000, and -16.7 per cent for funds with assets of less than $50,000.
Further, according to ISA’s analysis, for SMSFs with assets between $1 million and $2 million, returns at 2.2 per cent fell below the 2016 APRA-regulated fund average of 2.9 per cent, and well below the industry super fund 4.1 per cent average.
These numbers fall in line with the five-year average to 2016, in which APRA-regulated funds made average annual returns of 7.4 per cent, SMSFs with assets above $2 million made an average 5.6 per cent, those with $1.2 million made an average 4.5 per cent and those from $500,000-$1 million made an average 3.7 per cent.
SMSFs with balances below $200,000 made negative returns.
To ISA chief economist, Dr Stephen Anthony, the data suggests that SMSFs aren’t as suitable for “ordinary Australians”.
He said, “SMSFs with assets over $2 million on average generally performed on par with APRA regulated funds and underperformed industry funds, but medium to smaller ones showed appalling returns.
“The pattern is clear: the less you have, the worse you perform.”
He continued, commenting that smaller SMSFs also cop higher expense ratios of above 6 per cent.
Dr Anthony explained, “The administration costs of running an SMSF with a small balance are often too high.
“It’s important to know how your super fund stacks up on fees and net returns – otherwise you could be in for an unpleasant surprise.”