The story of your life viewed through your SMSF

I found reading Jo's SMSF story interesting. She must find auditing our fund very boring.

Dear Ms Heighway,

Hopefully I get my small story to you. On my reaching the early 70's and dealing with the results of 'September 11', I was helping a charitable organisation that was having to wind down from six staff and over 300 volunteers annually from Australia and an number of other countries, going to volunteer in about 100 odd countries annually, the needed staff reduced to one with me. It was then that I sold my home and I then had the capital to create a Share Port Folio and with our Accountant's advice, my Port Folio became my Personal Super Fund that had to take a number of years to create, due to Government Rules of course.

Only one mistake was made due to my misunderstanding my rather aged accountant's explanation of what the Government's rules were, so that I over transferred for one year by $100,000 and even though I reacted immediately I discovered my mistake, I was fined $50,000 which I immediately paid and then the ATO would not refund the fine even though it was explained to be a genuine mistake. The poor older Accountant lost his father and due to ill health he retired and I did what I thought to be the best thing not to legally claim from his Accountancy Firm where he was, but only as one Partner, and even though the Government changed the rules related to genuine mistakes, the ATO refused to change my case. Ce la Vie.

So my Super Fund was and still is my Super Fund that now as I am near 80, the Government is 'pushing' me into reducing my Super Fund. This is where I am very busy 'today' in gaining Capital Value and Dividends from the Share holdings while still having to pay myself. It is "68 thousand" this year, which is not going to be too easy without reducing the Port Folio. But my time involved every day is great fun I agree.

So do not let your SMSF owners give it over to be all done by others (even if it is your job) as it is great fun and great Interest from a family point of view. I have had much pleasure doing all sorts of things that are still being done with my SMSF that I am determined to keep going as long as possible while still responsibly paying my ways as Canberra requires.

Dear Name Withheld

You don't need to draw down your Port Folio.

Just because legislation forces you to withdraw more from your SMSF than you generate in cash doesn't mean you have to drawn down your investments. An alternative, though perhaps not as tax effective as your SMSF, is to establish a Family Trust. You can then transfer your Shares to the SMSF, providing your SMSF with the cash to pay your pension (that then goes into the Family Trust to pay for the shares you just bought from your SMSF). You get to keep your shares and enjoy those lovely dividends you have become accustomed to receiving.

Legislation may dictate how much leaves the SMSF but it doesn't dictate how much you spend nor how much you invest.

Enjoy your retirement.

SMSFs provide opportunities to grow financial knowledge and power, to seek advice and weigh up that advice against other sources of information. For me, our SMSF has been the story of growing awareness of good management strategies before money was inherited. As the value of our family SMSF has grown so has our family's interest in saving and investing. I struggled to feel encouraged to add co-payments and get excited about super when in an industry fund - and my employer was encouraging, insisting that each member met with their adviser at least once every 2 years. My adviser was helpful and has continued to be part of my 'support team' I would like to see the financial industry consistently encourage SMSF members to walk along side them when making decisions, rather than telling us we're not capable of making decisions. So much of what is written about SMSFs especially in newspapers and magazines is meant to undermine member confidence. That's why I read this newsletter weekly, as it encourages involvement.

Very inspiring Marg, I love that your SMSF grows with you, and that you have wisely found a support team to walk along side you in your journey. Thankyou very much for sharing.

Industry funds lose members as people with large balances choose SMSFs or retire. Industry funds should realise that these members could be 'retained' if they were offered help with retirement strategies and SMSF set up and administration. These areas may not be the typical domain of an industry fund, but perhaps they should be. Retaining a member under a different 'product' would surely be better than seeing them move to a competitor. The industry funds are in an incredibly strong position with members starting with small balances but staying in the funds for years, if not decades, as balances grow.Members are then lost when balances are substantial because the industry funds have not developed their product offerings in line with the needs of their clients.

Mark I'm not sure about you but I've noticed that many people who move into SMSFs often retain small balances in their industry funds - whether for insurance purposes, diversification, a bit of a safety net, or because they don't have fund choice over compulsory SG.

Industry funds could really take advantage of this by encouraging members to retain their connection over their lifetime by focusing on the arguments for having both an SMSF and retaining their industry fund membership. Could SMSFs and industry funds work together to provide complimentary experiences?

You're so right that industry funds have a great competitive advantage with attracting members early in their working lives. Viewing SMSFs solely as competition and not as an opportunity to work together is likely to continue damaging industry funds in the long term.

I have found from long experience that the more people talk about their investments the worse the performance actually is – usually they have no idea what they should be benchmarking against. If they bought a share at $1 ten years ago and its now worth $1.20 they have done “pretty good” – even though it’s gone backwards against inflation and against any benchmark + also failed to keep on track to achieve their retirement goals, etc, etc.

Alex you raise an interesting point. Sometimes taking the time to listen to people's SMSF stories is a great opportunity to provide better more targeted education in a way that is more personal. When advice or education is tied to a specific story that you can directly relate to, it makes much more sense.