The constant debate over which superannuation fund is best should not necessarily be a debate.
Different super funds are better for different people. Many should have more than one superfund to maximise the benefits of each fund.
Industry super funds are fantastic for younger people with smaller balances.
Retail super funds have their place for the middle of the road. For international clients, an SMSF is not appropriate and so a retail superfund may be the best option for tax efficiency and estate planning.
Self Managed Super Funds (SMSF's) are the most tailorable super funds and have significant tax planning and estate planning opportunities for wealthier clients.
Valor strongly believes that you should not look at these three different superannuation options as competitors, but rather they should compliment each other at different stages of life.
Industry super funds
Great for:
1. low balance
2. younger people
3. simple wealth
4. lower risk profiles
Low balance
Because industry super funds generally have the lowest fees, the lower balance super accounts really should be held via these vehicles.
Younger people
Younger people generally have less complicated financial lives and thus a simple account is more than fine.
Simple Wealth
If you have no family dependents, no complex family issues, then an industry fund may be the best option for you. More complex family arrangements may not be suited in these environments.
Low Risk Profile
With ultra-low interest rates upon us and likely here to stay for a while, the lower the risk profile you wish to be, the more likely you should be looking at an industry fund. Industry funds have the lowest fees and because it is near impossible to outperform on cash and bonds, you should probably keep to an industry fund environment.
Where a number of Industry Funds let their members down is their service levels. Often in life you get what you pay for. It is not unusual for us to sit on hold waiting to speak to the first available officer for 45 minutes, simply to ask an updated balance when contacting an industry fund.
We often have clients come to us because their industry fund was not able to help them on a matter.
Some industry funds have excellent insurance offerings. Most have only 2 year income protection offerings, which is usually insufficient, which requires the assistance of an insurance specialist.
Retail Super Funds
Once you have more complex insurance needs, family needs and estate planning needs, you may look to the next level of complexity for superannuation. Some retail funds have more features and benefits than industry super funds. Newer retail funds allow more direct investment which can have significant tax benefits to those in accumulation phase.
For the mid range client, a retail superfund may be a good option.
Because of residency requirements, SMSF's are not appropriate to a number of international clients.
SMSF's
SMSF's are the most flexible retirement tool available.
For many, they are not appropriate. For the wealthy, they are often the best option.
The estate planning benefits of SMSF's are superior to other superannuation options. The flexibility in this area allows protection of assets down bloodlines and other significant benefits generally unavailable from other forms of super. For those that are wealthy, protection of their wealth is often more important that other aspects.
The tax savings on a correctly structured SMSF can be significant, particularly when structured with other non-super assets. Those with significant wealth above the $3.4 million tax free amount for couples, are able to structure certain assets inside super and others outside super. An SMSF can allow cherry picking of assets for maximum tax efficiency.
Advice on different super products.
Because Valor has its own financial services licence and we have a simple desire to put our clients in a position they otherwise couldn't achieve, we use all of the superannuation options.
We often advice a blend of super funds to get the best features of each. For many of our clients we have an industry superfund for the cheap insurance and an SMSF for superior tax planning and estate planning.
Give us a call on 02 8013 5205 if you would like us to review your superannuation. The first appointment is always free of charge.
