Pros of Self-Managed Superannuation

While

self-managed superannuation will not suit everyone, there are some people who will find it is just what he or she wants. These are people who have had some experience in buying shares, or at least know how it is done. One of the main advantages is that you can choose what shares to invest in. This may be very important to those who have strong beliefs about say, not gambling. If this were the case, then you would not want your money invested into something like casinos.

The manager of an SMSF will not be afraid of a whole bunch of figures staring at them from their computer screen, and keeping records of everything will not faze them in the slightest. In fact they will be able to keep the most intricate records without worrying. And they will be able to keep up with the regular reporting that is necessary.

Of course, all of the above will take a great deal of time, so the person who is suited to run an SMSF will have plenty of time up his or her sleeve. They will also be smart enough to avoid any shady schemes to access their money early, and they will understand that the Tax Office will be onto their case quick smart if any illegal scheming is suspected. While they may need more financial advice than they thought, they also will realise that any financial advisor needs to be licensed to give advice. Who would want to take advice from someone not qualified to give it?

The person who can successfully set up his or her own SMSF will have at least $200,000 to invest. They will be able to make sure that they don't miss out on all those benefits available with a super fund that is managed by a third party such as life and other kinds of insurances. So if you think you have these skills and the time, then an SMSF may be just the thing for you.

Cons of Self-Managed Superannuation

Many people think that they will gain by switching to a self-managed superannuation fund (SMSF), but there are several disadvantages. One of these is the sheer time it takes to administer the trust in the way the law dictates it should be managed. There is a great deal more in running your own super fund than first meets the eye. Not only do you have to find good investments, but you must be sure that they are going to perform in a way that enhances your investment and meets your goals.

Finding investments may seem easy, but to make your investment as safe as possible, there needs to be diversity in the type on investment. Another disadvantage is that being a single investor, you don�t have the funds to purchase shares, benefits or insurance at a wholesale price like a managed fund has. And depending on your area of knowledge, your running costs will be more than with a managed fund, because you will have to hire both an auditor and a financial advisor. Experts suggest that an SMSF can cost up to $1700 per annum to run.

They also believe that a DIY investor needs at least $200,000 to make doing it himself worthwhile. And if fact, if the Australian tax office finds an SMSF of less than this, they will look into it very closely, as they have found that many such investments are simply schemes to get at those super funds before retirement - and that is illegal.

Finally, when you have an SMSF, the buck stops with you. That means if you lose money, there is no one to sue and no one to blame but yourself. And if you have done anything illegal - even inadvertently - then you must pay the penalty, which is likely to be a hefty fine, at the least. All this means that those people considering an SMSF should look at their options very closely before deciding to go ahead.




This post is intented for Australian Readers only.