YOUNGER generations are now looking to open self-managed super funds, a new survey has found.
Russell Investments and the SMSF Professionals Association of Australia’s research shows about 14 per cent of Generation X (31-45 years) and 10 per cent of Generation Y are looking to establish an SMSF in the next two years.
While there are many costs and complexities when opening an SMSF, 29-year-old James Choi says it has not deterred him.
“The reason I want to open an SMSF is so I have full control of my life savings and control the investments,” he says.
Experts say at least $200,000 is needed before an SMSF can be established, which Choi says is one of his concerns. “If I salary sacrifice for another half year, I should have enough funds,” he says.
RaboDirect Australia and New Zealand investments manager Tim Hewson says Gen Ys are a determined bunch, and if they have a plan they often stick to it.
“We all know what Gen Ys are like. If they’re going to make a decision to improve the control they have over their financial destiny, they’re almost certainly going to do it,” he says.
“They need to look at weighing up the benefits associated with control versus costs … you have compliance issues, you have ongoing administration costs.
“They do have an advantage over a lot of us of being able to spend a lot more time and be able to build their SMSF structure over a longer period of time.”
Australian Institute of Superannuation Trustees chief executive Fiona Reynolds believes SMSFs are only good for certain types of people.
“I would say you need to have at least $200,000 to start an SMSF, otherwise the fees can be quite high,” she says.
Reynolds says SMSFs are not the greatest option for younger generations.
“Most young people are probably not actively looking at their super at this stage in their life,” she says. “They are probably better off in a low-cost super fund.”