Who starts a self-managed superannuation fund and why?

Ron Bird, F. Douglas Foster, Jack Gray, Adrian Raftery (), Susan Thorp and Danny Yeung ()
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F. Douglas Foster: Discipline of Finance, The University of Sydney, Sydney, NSW, Australia
Jack Gray: Finance Discipline Group, UTS Business School, University of Technology Sydney, Broadway, NSW, Australia

Australian Journal of Management, 2018, vol. 43, issue 3, 373-403

Abstract: Self-managed superannuation funds (SMSFs) – small retirement savings funds with four or fewer members – now manage almost one-third of retirement savings in Australia, and serve over 1 million members. The number of SMSFs has increased to more than half a million in two decades, yet little is known about the reasons people start the funds and how they operate. We use a survey of more than 500 SMSF members and 500 large superannuation fund members to analyse why SMSF members commence and manage their own fund, compared to similar people who stay with a large fund. We find that control over investments and tax minimisation are the most common reasons for starting a SMSF, while satisfaction with large funds and unwillingness to take on the administrative burden of self-management are the most common reasons for not doing so. SMSF members do not show any greater financial skills than non-members, but they do display overconfidence, a higher risk tolerance and a more trusting attitude to financial professionals. Model results show that the majority of SMSF members start their funds at the suggestion of financial professionals. We also show that those who say they are thinking about starting a SMSF are different in significant ways from the eventual SMSF members, further evidence of the influence of the advice industry.

Keywords: Financial literacy; pension funds; self-managed superannuation funds; SMSF choice (search for similar items in EconPapers)
JEL-codes: H55 H75 J32 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:sae:ausman:v:43:y:2018:i:3:p:373-403

DOI: 10.1177/0312896217747331

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