APRA funds attempt SMSF breach

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In a speech to the ASIC Forum in Sydney yesterday, Challenger Retirement Income chairman Jeremy Cooper showed excitement over the increased competition in the SMSF sector.

Cooper addressed the issues facing ‘the elephant in the room’ that was SMSF. The growing sector currently houses $474.4billion in assets and is expected to break through the $500bn mark this year. He said that the response by some APRA-regulated funds to offer SMSF-like platforms was an interesting trend taking place in the market at the moment.

“There are good and bad aspects to some of these ideas, but is an excellent example of competition providing potentially better outcomes for members.”

He also highlighted the pooled superannuation trust (PST) suggested by HOSTPLUS, to facilitate investments by SMSFs in its investment options at wholesale prices. He said it would bring a new form of competition to the sector and will widen choices available to your SMSF clients.

The benefits of APRA entering the SMSF space would be to provide the safeguard that SMSF clients currently lack, Cooper said. “There is no special statutory safety net for them and nor should there be. I am very strongly of the view that there should not be an equivalent to Part 23 of the Superannuation Industry (Supervision) Act 1993 for SMSFs. You cannot have your cake and eat it too. A core trade-off in choosing an SMSF is that you are responsible for your wins and losses.”

He said the APRA funds would also solve the problem of older SMSF members trying to exit their fund when they tire of maintaining it.

“As the ‘self’ ages, the level of active decision-making, the interest in complex and technical matters and the desire to take on risk progressively diminishes. This is not catered for very clearly in the SMSF framework,” said Cooper.

“Just like Cinderella’s carriage, an SMSF will turn into a pumpkin if it is not tucked into bed by the appropriate time.”