In the world of Self-managed Super fund, a cross-insurance policy is one wherein an SMSF trustee takes out a policy over a member’s life with the clause to deduct premium from the account of another member. In being so, the cross-insurance policy benefits the member who has paid for the insurance in case of an insurance event arising.
Not all the Super funds can be star performers, and those which can be may fail to do so consistently. Take the case of IOOF Portfolio Service. It gave a 13.8% return in the year 2013, whereas it fared miserably in 2012 giving only -1.3%. So where does this leave us? How should we go about choosing Super fund then? There is no dearth of funds which have trailed lower than inflation and for a good period of time at that.
Are you thinking about setting up your own Superannuation fund? To update you with the statistic here, you are not alone. The run of SMSF has been nothing short of incredible, and it has gathered 1 million members in a very short time. Over the last 4 years, the industry has shown 26% growth and has a whopping $560 billion in assets. So when you say you want to set up a SMSF for yourself, you are not talking balderdash for sure.
SMSF vests a lot of power in the hands of its trustees, inasmuch as the trustees feel they have a lot of control over the investments they make and flexibility in terms of choosing which one they want to go for. Obviously, not all this comes that easy. Trustees need to stand on the right side of compliance and observe various SPAA and ATO restrictions.
A lot is being made out of the SMSF’s risk of borrowing. Funnily, and it cannot be a coincidence, that most of the vitriolic attack is launched by the big funds which have suffered immeasurably due to the growth of the SMSF industry. Now, the only avenue left to them is to malign SMSF. So, they talk about SMSF’s borrowing risk, lack of prudential regulations, and tax evasion, among other things. Let’s go through some of the illogical claims made by the SMSF attackers.
What are your long-term investment goals? What is your risk profile? Answer these questions loudly to yourself because these would determine what mix of assets will see you performing through the roof in terms of your SMSF fund.
What if your SMSF shares a bank account with various ‘related’ unit trusts? ATO guideline ‘ID 2014/7’ clearly marks out the course of action in such an event and talks about the regulations pertaining to keeping your SMSF money and assets segregated.
The SMSF industry is not governed by prudential regulations, but the strict eye of the ATO more than compensates for it. So if you are an SMSF trustee and you feel you have erred somewhere and the ATO may attend to it anytime soon, it is wise to get your folly corrected.