Rising living costs are prompting many self-managed super fund members to reassess how their retirement is structured. An SMSF is not a set-and-forget arrangement; trustees are responsible for managing the fund’s Investment strategy and reviewing it as circumstances change.

When higher household expenses affect the real cost of everyday spending, assumptions behind a fund’s asset allocation, Liquidity position and income planning may need to be revisited. Understanding how these pressures influence Retirement Planning can help trustees review whether their strategy continues to reflect their circumstances.

Strategy is a Trustee duty, not an optional extra

Under Superannuation law, every SMSF must have and implement an investment strategy, and trustees must review that strategy regularly.

The strategy must consider factors including risk and return, diversification, liquidity requirements, the fund’s ability to meet liabilities such as pension payments and the circumstances of members.

When living costs rise, both member circumstances and fund obligations may change. This is one reason regular strategy reviews are an important part of SMSF governance.

Reviewing a strategy does not necessarily mean changing the entire portfolio. It means assessing whether the documented approach still reflects the fund’s position and recording that consideration.

Why asset allocation gets a second look

Asset allocation refers to how a fund divides investments between different categories, such as growth Assets and defensive assets.

Growth assets, including shares and property, may provide potential for long-term Capital growth but can experience short-term fluctuations. Defensive assets, such as cash and fixed interest investments, may provide stability and liquidity but may not always keep pace with rising living costs over long periods.

For members receiving a pension, this balance becomes particularly important.

A portfolio with limited growth exposure may face challenges maintaining purchasing power over a long retirement. A portfolio heavily weighted towards growth assets may experience larger fluctuations at a time when withdrawals are being made.

Rising living costs can highlight the importance of reviewing whether the investment mix selected years earlier still matches the fund’s current needs.

Liquidity moves up the priority list

Liquidity is the ability of an SMSF to meet financial obligations without needing to sell assets at unsuitable times.

This is important for all SMSFs, but it can become more significant when retirees face increasing household expenses. The fund must also continue meeting minimum pension payment requirements.

Minimum pension payments are calculated as a percentage of the pension Account Balance at 1 July and increase with age.

For 2026–27, the minimum rates are:

  • 4% for members under age 65;
  • 5% for members aged 65 to 74;
  • 6% for members aged 75 to 79;
  • 7% for members aged 80 to 84;
  • 9% for members aged 85 to 89;
  • 11% for members aged 90 to 94;
  • 14% for members aged 95 or older.

If the required minimum pension payment is not made by 30 June, the pension may be treated as having ceased for tax purposes from the beginning of the financial year, potentially affecting exempt current pension income treatment.

Funds holding large amounts of Illiquid assets may need to pay closer attention to how pension payments and other expenses will be funded.

The particular challenge of lumpy assets

Many SMSFs hold direct property, which can create liquidity considerations for retirement-phase members.

Unlike listed investments, property cannot generally be sold in small portions to fund regular pension payments. A fund concentrated in one major asset may have less flexibility when expenses increase or payment obligations change.

Consider a hypothetical SMSF that holds most of its value in a single commercial property with only a limited cash reserve. If pension payments increase due to higher living costs, the fund may find it difficult to access cash without selling or refinancing the main asset.

This example is hypothetical and is intended only to illustrate the potential liquidity considerations associated with concentrated assets.

Reviewing the strategy in practice

When trustees review their investment strategy due to changing living costs, the focus is generally on understanding the fund’s position rather than reacting to short-term conditions.

Questions trustees may consider include:

  • whether the current asset mix reflects member circumstances and risk tolerance;
  • whether sufficient Liquid assets are available to meet pension payments;
  • whether the fund is appropriately diversified;
  • whether insurance arrangements remain suitable for members.

Trustees are required to consider insurance as part of the investment strategy and review that consideration regularly.

Documenting the review is also an important part of trustee responsibilities. Where decisions involve tax, estate planning or personal circumstances, professional advice may be appropriate.

What to watch next

SMSF members may continue monitoring household expenses, pension payment requirements and the fund’s liquidity position.

The annual 1 July pension balance reset provides a natural opportunity to review minimum payment requirements, while significant changes in member circumstances may also trigger a strategy review.

Key Insights

Rising living costs are influencing how SMSF members think about retirement planning by highlighting the importance of investment strategy reviews, liquidity management and sustainable pension planning.

There is no single response that applies to every SMSF. The appropriate approach depends on each fund’s assets, members, objectives and circumstances.

Regularly reviewing the fund strategy helps trustees ensure their SMSF continues to meet its purpose and remains aligned with changing retirement needs.