Thirty-two percent ^* of all retirement funds are in Self Managed Super Funds (SMSFs) so it appears people think it is. However, more than 20,000 SMSFs have been closed over the last five years ^**.

So is the balancing act between risk and control tougher than people think? Jim Furnell CFP (c) of Maclean Partners (a member firm of Professional Investment Services) outlines the steps involved in setting up an SMSF and the responsibilities of managing it.

Step 1 – Setting up the fund
The first step is to seek advice to determine whether an SMSF is right for you. If you decide to proceed, the next steps are to establish a trust deed, appoint fund trustees, develop an investment strategy and submit an application to the Australian Taxation Office (ATO).

Step 2 – Administering the fund
SMSFs have the same administration responsibilities as any other super fund, however, the difference is that an SMSFs’ members are generally the trustees, meaning they’re responsible for:

• Accepting contributions and rollovers
• Record keeping
• Ongoing compliance (including tax returns, audits and reporting)
• Investment management
• Managing any benefit payments

Step 3 – Managing the investments
SMSFs allow investors to select from a wide range of investment choices, including direct property, which aren’t available in other super funds.

Other aspects of the trustee’s role include determining the fund’s investment strategy, selecting and trading investments, and record keeping.

Weigh up your options

It’s important to understand the features, costs and responsibilities of managing your own super versus remaining with Russell SuperSolution.

Costs
SMSFs can be expensive and time consuming to set up and administer. In fact, the Investment and Financial Services Association (IFSA) estimates that the average SMSF can cost around $3,500 in establishment fees ^***. You need to weigh up the cost-effectiveness of an SMSF based on your circumstances.

Compliance
Trustees of an SMSF are responsible for ensuring the fund complies with not only the fund’s trust deed, but also all relevant legislation and tax regulation. Superannuation rules are taken very seriously and there are heavy penalties for any breaches.

When thinking about SMSFs, there are many important aspects to consider, and many conclude that the benefit of control can be quickly offset by the risks and responsibilities.

However, there still are a number of benefits to managing your own super; just remember to get the right advice from a licensed financial professional.

For more information, contact 1800 555 667. Alternatively, you can weigh up SMSFs for yourself, with our online features and costs comparison.

Did you know?
The Russell Private Investment Series (RPIS) gives SMSF investors access to some of the world's best investment managers and a diverse range of global investments. Plus they get access to the benefits of consolidated reporting and Russell’s investment excellence.
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* APRA – Quarterly Superannuation Performance March 2009
** ATO - Self-managed super fund statistical report – March 2009. Figures are for the period July 2003 – June 2008.
*** IFSA - SMSF Trends – February 2009