SMSFs make up 99.5% of the number of funds and 29% of the $2 trillion total superannuation assets as at 30 June 2015. 1There were 557,000 SMSFs holding $590 billion in assets2, with more than 1 million SMSF members.
The continuing strength and community confidence in the SMSF sector is demonstrated by positive shifts in SMSF numbers, total assets and member account balances over the five years to 2014. Changes in the composition of SMSF asset portfolios show the ability of SMSFs to adjust to changing circumstances and economic conditions.
Over the five years to 30 June 2014, the average assets of SMSFs grew by 23% and reached more than $1 million for the first time in 2014. Likewise, average assets per member increased to $564,000, the highest over the period.
Member contributions made to SMSFs increased by 41% over the five years to 2014. However, employer contributions made to SMSFs fell by 9%. By comparison, both member and employer contributions to all super funds increased by 30% and 22% respectively.
SMSF members tended to be older than members of APRA funds and had both higher average balances and higher average taxable incomes. However, the trend continued for members of new SMSFs to be from younger age groups when compared to those across the total SMSF member population. The median age of SMSF members of newly established funds in 2014 decreased to under 50 years.
The majority of SMSFs continued to be solely in the accumulation phase (53%). However, over the five years to 2014, there was a shift of funds moving into the full pension phase (8%). This is consistent with the increase in benefit payments over the period, to more than $30 billion for the first time in 2014.
Of SMSFs starting to make pension payments in 2014, 48% were more than five years old, while 28% were less than two years old. Of funds established over the last 10 years to 2014, 69% have not started making pension payments.
SMSFs directly invested 83% of their assets, mainly in cash and term deposits and Australian-listed shares (a total of 60%). In 2013–14, funds across most asset value ranges tended to also favour cash and term deposits, while those with more than $1 million in assets held a higher proportion in listed shares. SMSFs in the pension phase held a more diversified investment portfolio.
Of SMSFs with assets held under limited recourse borrowing arrangements, the majority of funds used those arrangements to acquire assets in residential real property and overseas shares, representing 2.4% and 1.6% of the total SMSF population respectively. In terms of value, real property assets collectively made up 85% or $12.8 billion of investments held under limited recourse borrowing arrangements.
At 30 June 2014, SMSFs held $13 billion in borrowings representing 2.3% of the total value of assets held by SMSFs. The proportion of SMSFs with borrowings increased progressively from 2.3% of funds in 2010 to 6.7% in 2014. Likewise the average amount borrowed increased from $305,000 in 2010 to $373,000. SMSFs with borrowings were more likely to hold non-residential and residential real property, assets held under limited recourse borrowing arrangements and other assets, compared to the total SMSF population.
In 2013–14, estimated return on assets for SMSFs was positive (9.8%). This is the fifth consecutive year the estimated SMSF return on assets has been positive. The trend in estimated returns is consistent with that for APRA funds of more than four members.
The estimated average operating expense ratio of SMSFs in 2013–14 increased to 1.06% and an average value of $11,200. SMSFs in pension phase had higher total average operating expenses than that of funds solely in accumulation phase. In contrast by operating expense type incurred, SMSFs in accumulation phase tended to have higher average interest expenses. This is in line with most SMSFs with borrowings being in the accumulation phase.
1 APRA 2015, June 2015 Quarterly Superannuation Performance, APRA Statistics, 20 August 2015, p82 ATO 2015, Self-managed super fund statistical report, June 2015