Performance must be taken into account when assessing the cost of self-managed superannuation funds (SMSFs) in order to establish perspective, according to Townsends Business and Corporate Lawyers principal Peter Townsend.
“The debate about SMSF costs doesn’t take in return, and in that respect the debate is wrong headed because you can’t assess the comparative cost of SMSFs versus public offer funds unless you take into account the return issue as well,” he said.
In the past, SMSFs have been criticised for being a more expensive retirement savings vehicle compared to public offer superannuation funds.
Statistics which Townsend presented at a recent adviser briefing showed the average cost of operation as a proportion of fund assets for an SMSF was 1.4 per cent, while for a public offer fund it was only 1 per cent.
“Despite the averages, each fund is assessed on a fund-by-fund basis and potentially even small funds can minimise their costs to an acceptable level,” Townsend said.
“But costs also should be viewed against performance and that’s a part of this debate that is not being addressed in my view.”
Anecdotal evidence suggests the average balanced super portfolio for public offer funds has been down by 19 per cent for this financial year, while SMSFs have only suffered losses of around 7 or 8 per cent, according to Townsend.
“If that’s the case, and that’s probably based on the fact that SMSFs have a higher exposure to cash and real estate which has not done quite as badly as the equity market, then that more than compensates for the fact that SMSFs might be slightly more expensive to run,” he said.
