Comparing the real cost

Large APRA-regulated funds usually charge fees as a percentage of balance, so costs scale with the account. An SMSF has largely fixed annual costs: an independent audit, the 259 AUD supervisory levy and usually administration and tax work, regardless of balance.

Comparing the total annual cost of running an SMSF against the fees currently paid, in dollars rather than only percentages, and including the value of time spent, gives a clearer picture.

Weighing features gained and lost

An SMSF can offer broader Investment choice, including direct property within the rules, and more control over strategy and timing. Large funds offer features that can be overlooked, such as default insurance, professional investment management, and largely automatic administration.

Listing what would actually be used from an SMSF, alongside what specifically cannot be done through the current fund's member-direct or choice options, turns a general impulse into a concrete comparison.

Protections that change

Some protections differ between the two. In the rare event of Fraud or theft, members of APRA-regulated funds may be able to seek compensation under a government-assistance scheme, whereas SMSF members generally cannot. Dispute resolution differs too: APRA fund members can access the Australian Financial Complaints Authority, while SMSF trustees generally resolve disputes among themselves or through the courts.

Insurance cover held in an existing fund may cease when a member rolls out, and obtaining equivalent cover through an SMSF can depend on age and health.

Effort and exit considerations

An SMSF requires ongoing work: setting and reviewing an investment strategy, keeping records, arranging the annual audit and lodging returns. A large fund handles this on the member's behalf.

How the fund would wind up if circumstances change — for example, if a member dies, loses capacity or moves overseas — is also relevant. Winding up an SMSF has its own steps and costs.

A side-by-side example

Consider a hypothetical comparison. Tom pays 0.9 per cent a year in his current fund on a 250,000 AUD balance, roughly 2,250 AUD. An SMSF might cost a similar amount in fixed fees but shift the compliance work onto him. Changing the balance to 800,000 AUD raises the percentage-based fee while the SMSF's fixed costs largely do not change, altering the comparison.

The mechanics of a rollover

Rolling money out of an existing fund can trigger the loss of insurance cover held there, and exit fees or timing considerations can affect the process. A new SMSF needs to be properly established and registered before it can receive a rollover.

Selling Assets to move to cash for a rollover may crystallise gains or affect market timing, which is relevant to planning the transition.