by Olivia Long

The latest self-managed super fund (SMSF) figures to 31 March 2014 from the Australian Taxation Office saw our industry notch up a significant achievement – one million members. When their short history is considered – funds with less than five members were only recognised in the 1994 SIS legislation – it’s been a remarkable journey for our sector. When you add the fact that there were 528,701 funds at 31 March, and funds under management are about $580 billion, the achievement is even more remarkable.

Along the way there has been no shortage of critics, including Jeremy Cooper who headed the Labor Government’s inquiry into superannuation. But his initial scepticism about the viability of the SMSF sector wasn’t reflected in his final report that was handed down in 2010; he became a convert.

Cooper’s strong endorsement of the sector hasn’t deterred other critics, although, based on their submissions to the Financial System Inquiry, significantly it does exclude the Reserve Bank, APRA and Treasury; an implicit thumbs up for a sector controlling about one-third of all superannuation assets.

But others are queuing up and they have no shortage of reasons; trustees lack the necessary skills to handle an investment portfolio; there should be a minimum account balance (at least $250,000); even educational qualifications have been mooted.

The only issue not publicly aired – the competition they provide other superannuation sectors – is, in all likelihood, their prime motive.

It’s with this in mind that I looked beneath the one-million figure to see what was the rate of growth was. Is it sustainable? Or are our critics right – the wrong people with the wrong motives are setting up SMSFs.

So it’s encouraging that while number of SMSF establishments continues apace, the rate at which it’s happening is slowing.

For year-on-year to 31 March 2014, the increase was 52,394 to 1,006,975, a rise of 5.5%. This compared with a 7.2% increase in March 2012-13 and a 7.3% jump in March 2011-12. Breaking March 2013 to March 2014 down into its four quarters, the increases were 0.8%, 2.1%, 1.4% and, in the last quarter, 1.1%

Quite clearly the timeframes are too short to say these trends are set in stone; for example, in this quarter it wouldn’t be surprising if there was a jump as people prepare for the end of the financial year. But I do think it’s fair to conclude that increases in SMSF members at this level are sustainable.

People who are opting to take responsibility for their retirement savings are, I suggest, doing their homework and determining whether the time, effort, and, let’s be honest, the risk, is worthwhile. Certainly the number of inquiries we get as an SMSF specialist administrator suggests people are increasingly looking to get professional advice before going down this path.