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Managing risk in your SMSF

SMSFs provide the trustee autonomy and an increased opportunity to maximise your retirement savings. However, an investment strategy must be accompanied by a risk management plan should some of your investments come up short.

Consider the following risk management strategies:

Diversification
Diversification reduces risk by investing in many different assets including property, annuities and equities. By spreading your earnings across several investments you minimise the risks to your retirement nest egg that can occur if one investment suffers a loss or a disappointing return. Organise your target returns according to your asset class and establish the accepted variation range from this target. This allows you to track your investment portfolio and whether it is setting you on the right financial path.

Liquidity
If you tie up your money in assets like property, then you may run short on cash. It is important that you have cash to cover the costs of running your SMSF and in the case of a member’s total and permanent disablement. If you’re also forced to sell an asset to get this cash the market conditions may not be ideal, and you could receive a disappointing return because you need cash in a rush.

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News

Updates to the unclaimed superannuation money protocol

January 15, 2020

The Superannuation (Unclaimed Money and Lost Members) Act 1999 (SUMLMA), more commonly known as the unclaimed superannuation money protocol, has been updated recently to provide a clearer structure going forward.

SUMLMA provides guidance on in relation to unclaimed money, lost member accounts, superannuation accounts of former temporary residents and their associated reporting and payment obligations. The update has now added content on inactive low balance accounts.

The act now clearly defines what is an inactive low-balance account, how statements and payments work, the registering of lost members and various rules for special cases.

It is important to note that the information in the protocol does not apply to super providers that are trustees of a state or territory public sector super scheme, in which:

The protocol provides administrative guidance only and should not be taken as a replacement for the law or technical reporting specifications.