With the deadline for 2014 SMSF annual returns now passed, Accurium research covering over 65,000 SMSFs shows how the retirement wealth of Australia’s SMSF trustees changed over the 2014 financial year.
Accurium’s database of SMSFs is one of the largest available and this SMSF Retirement Insights paper provides the first detailed figures to be released for the 2014 financial year.
Accurium’s dataset represents SMSF households who are phasing into retirement and, together with our Retirement Adequacy Model, provides unique insights into how well prepared SMSFs are for retirement.
- The median SMSF balance increased by 5.2% during the 2014 financial year to $1,091,000. The increase was driven by investment returns of 8.2% after taking into account contributions and withdrawals over the year for the median SMSF couple.
- Most SMSF couples have a very good chance of enjoying a retired lifestyle equivalent to Association of Superannuation Funds of Australia’s (ASFA) Comfortable Retirement Standard (spending $58,444 per year for couples).
- SMSF couples who aspire to more prosperous lifestyles have further to go in setting up the retirement they desire. Based on their SMSF balances, only 28% can be confident of affording a lifestyle costing $100,000 per year for life.
- SMSF couples who want higher levels of confidence of achieving their desired lifestyles in retirement might need considerably more savings. A 65-year old couple would need $591,000 in savings to enjoy the ASFA Comfortable lifestyle with a one in five chance of outliving their savings. However, they would need 35% more capital, or $798,000, in order to reduce that risk to a 1 in 20 chance of falling back on the Age Pension.
- SMSF trustees on average have 84% higher taxable incomes than the average Australian1 and are prepared to work longer and retire later to achieve financial security. Of the 85,000 individual trustees in Accurium’s database who are still contributing to and growing their retirement savings, around 31,000 (or 36%) are over the age of 65.
- Means testing rules that take effect from 1 January 2017 will have relatively little impact on SMSF trustees’ ability to fund their retirement. Nonetheless, the Age Pension will still be a very valuable resource for most SMSF trustees, particularly at older ages as their savings are consumed to support spending
This SMSF Retirement Insights paper highlights the wide range of outcomes for different SMSF trustees based on reasonable assumptions about their lifestyle objectives and risk preferences. It shows how vital it is for SMSF practitioners to know their clients and understand their goals. For example, the difference between a 65-year old SMSF couple wanting a reasonable probability of living at the ASFA Comfortable level throughout retirement, and the same couple wanting to spend $100,000 per year with a high level of certainty is $1.6 million in extra capital at retirement. This range can increase further if the couple also have a bequest motive.1 ATO: Self-managed super funds: A statistical overview 2012–13.