Self-Managed Super Funds (SMSFs) have their attractions, but many find the administration effort and associated costs prohibitive. If you would like to take greater control of how your superannuation is managed but don’t want an SMSF structure, perhaps a Super Wrap is more your style.
A Self-Managed Super Fund is a portfolio of individual assets, grouped together to create an investment strategy. Each asset attracts its own fees and has its own tax arrangements. The overall SMSF is regulated by a set of rules known as the trust deed and is overseen by a trustee.
Conversely, a Super Wrap is a superannuation strategy that enables you to bundle a portfolio of ASX listed shares, managed funds, cash and insurance into one complying account.
They differ from SMSFs in a number of ways – the most noticeable being that there’s no requirement for either trust deed or trustee and the associated costs are much lower.
As an investment alternative, they often have access to wholesale and institutional funds – assets not ordinarily accessible to individual investors due to their high minimum investment amount, sometimes as high as $200,000.
How does a Super Wrap work?
A Super Wrap enables you to ‘wrap’ a number of investments around a central cash account, all under the one ‘umbrella’ or wrap account. Investment distributions or income is either reinvested into the fund, or allocated to the cash account.
Fees and charges are deducted from the cash account instead of individual investments which, depending on share price movements, can disadvantage the asset and impede its earning potential.
What are the benefits?
Consolidated into one structure, Super Wraps benefit investors by:
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requiring only one application form for set-up;
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issuing one statement for the entire portfolio;
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generally charging no exit or entry fees for switching between investments;
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applying fees at the wrap level instead of each separate investment.
What does this mean?
Less red tape means your financial adviser can easily help you construct the most appropriate Super Wrap portfolio for your needs.
They offer more control over your retirement portfolio and freedom to make your own investment choices. Ongoing compliance, administration and trustee responsibilities are handled by the fund manager providing the wrap account. This translates into no headaches for you!
Reviewing your superannuation portfolio is less complicated and time-consuming than for a SMSF as asset allocations can be re-balanced in a single investment instruction.
Overall, a Super Wrap can provide a cost-effective and easily managed superannuation solution, but they’re not for everyone. As with any investment strategy, it’s always wise to seek professional guidance before making a decision.
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This provides general information and hasn’t taken your circumstances into account. It’s important to consider your particular circumstances before deciding what’s right for you. Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business, nor our Licensee takes any responsibility for their action or any service they provide