Who Starts a Self-Managed Superannuation Fund and Why?

41 Pages Posted: 18 Oct 2016

See all articles by Ron Bird

Ron Bird

University of Technology Sydney (UTS)

Doug Foster

University of Surrey - School of Management

Jack Gray

University of Technology Sydney (UTS)

Adrian Raftery

Deakin Business School

Susan Thorp

University of Sydney Business School; Financial Research Network (FIRN); Centre for International Finance and Regulation (CIFR)

Danny Yeung

University of Technology Sydney (UTS); Financial Research Network (FIRN)

Date Written: September 17, 2016

Abstract

Self-managed superannuation funds (SMSFs) – small retirement savings funds with four or fewer members – now manage almost one third of retirement savings in Australia, and serve over one million members. The number of SMSFs has increased to more than half a million in two decades. Yet little is known about the reasons people start the funds and how they are operated. We combine survey responses of more than 500 SMSF members and 500 large superannuation fund members to understand the motivation of SMSF members and how they compare with similar people who stay with a large fund. Control over investments and tax minimisation are the most common reasons for starting a fund. Satisfaction with large funds and unwillingness to take on the administrative burden of self-management are the most common reasons for not doing so. SMSF members do not show more financial skill than non-members, but they do express a higher risk tolerance and a more trusting attitude to financial professionals. We present evidence that the majority of SMSF members start their funds at the suggestion of financial professionals. We also show that the types of people who say they are thinking about starting a SMSF are different in significant ways from the types of people who end up as SMSF members, further evidence for the influence of the advice industry.

Keywords: Self-managed superannuation funds, SMSFs

Suggested Citation

Bird, Ron and Foster, Doug and Gray, Jack and Raftery, Adrian and Thorp, Susan and Yeung, Danny, Who Starts a Self-Managed Superannuation Fund and Why? (September 17, 2016). CIFR Paper No. 127/2016. Available at SSRN: https://ssrn.com/abstract=2853885 or http://dx.doi.org/10.2139/ssrn.2853885

Ron Bird

University of Technology Sydney (UTS) ( email )

15 Broadway, Ultimo
Ultimo, New South Wales 5000
Australia

Doug Foster

University of Surrey - School of Management ( email )

Guildford, Surrey GU2 7XH
United Kingdom

Jack Gray

University of Technology Sydney (UTS) ( email )

15 Broadway, Ultimo
PO Box 123
Sydney, NSW 2007
Australia

Adrian Raftery

Deakin Business School ( email )

221 Burwood Highway
Burwood, Victoria 3125
Australia
+61-3-92446643 (Phone)

HOME PAGE: http://www.deakin.edu.au/profiles/adrian-raftery

Susan Thorp (Contact Author)

University of Sydney Business School ( email )

P.O. Box H58
Sydney, NSW 2006
Australia
+61 2 9351 6354 (Phone)

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Centre for International Finance and Regulation (CIFR) ( email )

Level 7, UNSW CBD Campus
1 O'Connell Street
Sydney, NSW 2000
Australia

Danny Yeung

University of Technology Sydney (UTS) ( email )

15 Broadway, Ultimo
PO Box 123
Sydney, NSW 2007
Australia

Financial Research Network (FIRN) ( email )

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

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