Funds with low balances are paying more.
Summary: SMSFs with very low balances are paying higher costs than APRA funds.
Key take-out: Trustees need to consider the costs versus the benefits of operating a fund.
If your self-managed superannuation fund has a balance below $1 million, be aware that you are most likely paying fees and costs to your administrator that are significantly higher than those applied by APRA-regulated funds.
That’s just one of the stark messages from the Productivity Commission in its detailed assessment into the efficiency and competitiveness of Australia’s $2.6 billion superannuation industry.
And somewhat concerning is that around 86 per cent of SMSFs (just short of 510,000 funds) have balances below $1 million, and funds with balances below $200,000 are paying anywhere from 5 per cent to 8 per cent of their total balance annually in administration and operating costs.
The Productivity Commission notes that reported costs for SMSFs have increased over recent years, particularly for small funds with low balances below $100,000, which overall have achieved poor net returns.
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