By far the most common way for Australians to save for their retirement is by investing in super funds. Thanks to a strong stock market and low interest rate environment, in 2012/ 13 investors saw the best super fund returns for seven years. Average returns in the 12 months to June 30th2013 were 13.7%, compared to the 10 year average of 6%.
What is a Super Fund?
A super fund is an investment fund specifically designed to provide funds for your retirement. Employers are obliged to pay into a super scheme for employees (providing they meet certain conditions), and in some cases the government will also contribute.
There are tax advantages for individuals saving via a super fund, though this also means there is a cap on those contributions.
Types of Super Fund
There are several types of super fund, and all have had an incredible year. According to APRA (the Australian Prudential Regulatory Authority), Australia’s super fund pool now stands at $1.62 trillion. The main types of super fund are:
Retail super funds, with assets of $422 billion: that’s an increase of nearly 14% on the year.
Industry super funds, the strongest performer with a rate of return of 14.4% for 2012/ 13, grew their asset base by 21.5% to over $316 billion.
Public sector Employee funds – those that are reserved for employees of public services – saw returns of 14.2%.
Small APRA Funds (SAFs), funds with an approved trustee but created for fewer than 5 individuals, combined with self-managed super funds (SMSFs), saw their assets grow to over $500 billion.
The super fund industry also includes Wholesale Master Trusts and Employer Stand Alone Funds – the former established for multiple employers and the latter created by employers for their employees.
Self-Managed Super Funds (SMSFs)
By far the largest portion of Australia’s super funds is now held within the SMSF community. Almost a third of super funds are now held in SMSFs, with the obvious advantage being the ability to control your own destiny. An SMSF’s members are generally the trustees, and there is great flexibility of assets that can be held within the fund.
An SMSF is also the only super fund type that can be used to invest in directly held property. And now this opportunity has been bought into fuller focus by new rules allowing SMSFs to borrow to invest.
Of course, there are rules governing property held within an SMSF. For example, if you’re the trustee of an SMSF then you wouldn’t be able to live in the property invested in, or make other personal gains from the assets held within the SMSF.
Investing in property in an SMSF
Undoubtedly the popularity of SMSFs owes much to the attraction of property as a retirement planning investment. Residential property, for example, has the benefit of rental income and capital gain, and negative gearing can be used positively by the fund.
However, as with all investment assets, the best returns depend upon making the best decisions. SuperFinance Professional Networks offer our clients fully rounded SMSF property services. We work with authorised financial advisors, and specialise in property investment through SMSFs.
Our advice is tailor made to your personal situation, and we make sure all of the legal requirements of property investment are backed by the best law firms.
Super funds have had their best year since 2007, and many investors now consider the best super fund to be the SMSF. It’s flexible and tailored to you – just like our SMSF property services.
