For many of us, it is important to plan for the future and for our retirement. While the biggest asset we have right now is our ability to work and earn an income, there will be a time in life where we want to retire and live from our savings.
Governments around the world also encourage saving for retirement. This government support has many different names, from retirement schemes, to pension funds and superannuation funds. But they all have in common that they are a government-approved and supported way of saving for our retirement.
The typical structure of a government-supported pension is that people pay into a fund that is regulated by a government authority or other kind of regulator. Typically the employer and employee will both pay into the fund, and in some cases the Government may also contribute when certain conditions have been met to encourage further savings.
These funds have a number of compliance responsibilities that they need to meet, including administrative compliance, transparency around the investment and risk management strategies and compliance around the release of the funds.
Normally the funds in such a pension are released when one of the conditions is met. This may mean that the beneficiary reaches a certain age (for example 65) or has a fatal illness that requires support from their fund.
One of the popular options for a retirement funds are SMSF pensions. SMSF stands for self-managed super funds. A SMSF is technically a DIY superannuation fund, where the trustee who administers the fund is also the beneficiary of the fund.
There are a number of advantages as well as disadvantages to setting up SMSF pensions.
Here is a brief overview of the advantages that come with having your own SMSF pension:
• Full control of your superannuation savings
• The ability to invest in innovative investments as long as they fit with the overall investment and risk management strategies
• Valuable advisors including superannuation accountants and independent SMSF auditors can help you make the right decisions
To provide a balanced perspective, here are some of the disadvantages of setting up an SMSF:
• High starting capital required for the SMSF to deliver value
• SMSF trustee responsibilities include administrative and compliance issues
In summary, when making the decision whether SMSF pensions are a right option for you, it is prudent to do your research and consult some industry professionals to give you advice. You may choose to consult a lawyer, a financial planner, a superannuation accountant, an independent SMSF auditor or any other industry specialist to provide this help.