What is a self-managed super fund?

A self-managed super fund (SMSF) loan enables borrowers to take control of their superannuation earnings and invest directly into assets such as property. Rather than relying on your super fund to maximise your retirement savings, SMSFs give you the choice of how your money is invested.

How does a SMSF differ from a retail or industry super fund?

If you’ve been an employee in Australia, then you should have a superannuation fund. Your employer will put 11.5% of your income every year into your super for you to access when you retire. A retail or industry super fund will invest your retirement savings for you. How they invest it is dependent on the provider. While you have a right to know how your fund is investing your money under Portfolio Holding Disclosure rules, with retail or industry super funds you’re trusting your super fund to make the right decisions for you.

With a SMSF you take control of your own investments. It opens investors up to options such as leveraging their super to purchase assets, making SMSF lending an affordable way for borrowers to enter the property market.

What are the benefits of SMSFs?

The benefits of SMSFs lie in their potential profits. For example, if you have $150,000 in your super, with an average return on shares of 8%, you would earn $12,000. However, if you invest in a property worth $600,000, even with a lower return of 5%, you would earn $30,000. The leverage and potential benefits, especially if you sell the property in retirement, can be significant.

Are there risks to using SMSFs?

While SMSFs can have huge benefits, they require effort and knowledge. You need a solid understanding of investments, legal obligations, and fees, and you need to be willing to put more time into it than you would in an industry or retail fund.

The most important thing if you’re considering using a SMSF is to find a financial advisor or accountant to work with. A financial advisor or accountant will analyse your financial situation and goals to help you determine whether a SMSF is the right choice for you. They’ll also be able to help you set up an investment plan and get the most out of your retirement savings.

Want to talk to someone about SMSF loans? Give our broker Paul a call on 0421 323 708.