According to the AFR, in the Productivity Commission’s draft report into superannuation it was suggested that self managed super funds with balances of less than $1m are not worth it and those dollars would be better in a “professionally” managed fund:
This would imply that the majority of SMSF members are likely incurring costs higher than those incurred, in fees, for members of an average APRA-regulated fund, though their net returns appear to be broadly similar.
The problem with this analysis is that it fails to price in the risk of nationalisation. And full disclosure, Mr and Mrs Spartacus have a self managed super fund with a balance well below $1m. Now:
But Spartacus is not going to make it easy for the government to get his savings when the ultimate nationalisation of superannuation comes. Just look at the scoreboard.
- Australia’s Commonwealth Government debt is hurtling towards $1 trillion dollars (you know about half the current balance of superannuation funds). This debt does not include State Government debt.
- Spartacus does not believe a word of what the Government or Opposition say about spending restraint or debt reduction.
- The next likely interest rate movement will be upwards. And if there is another global financial shock, as a massive capital importing country, Australia will need to massively increase interest rates to keep the flows coming.
- Increasing interest rates coupled with increasing debt means that Australia’s Commonwealth government debt service costs are on track to eat the budget. Forget NDIS or Gonski spending. Interest payments are where the growth is gonna be.
- And when the Government can’t borrow any more or service the debt, what are they going to do? They will do like Willie Sutton and will go where the money is. They won’t call it nationalisation, but they will swap superannuation deposits for Commonwealth Government IOUs.
And to nationalise the superannuation system, the Government will start with the biggest blobs which are in the professional superannuation system not the self managed system. Not to mention that it would be easier to get the money from 10 or so industry funds and 10 or so retail funds rather than the 1 million plus self managed funds.
Yes. Eventually they will come for the self managed money, but by then, hopefully Spartacus’ savings (or what is left of) will be in crypto.
No Spartacus does not have a crystal ball and cannot see the future. But for sure he is going to price the risk of superannuation nationalisation in, and accounting for that, there is no minimum superannuation balance at which Spartacus believes it is worthwhile outsourcing to professional managers.
But to each their own. After all, a government agency (Productivity Commission) has just told you what is better for you.
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