Self-managed super funds have the edge over their APRA-regulated counterparts, according to insights from Rice Warner.
Rice Warner said SMSFs cater well for retirees as their structures are more sensible and allow retirees to manage their finances properly.
The company said despite their small size, these funds have advantages in three key areas; administration including fund and tax structure, financial advice and investments.
"The key advantage of SMSFs is that they pool family superannuation - more than 85% of these funds have been set up for couples," Rice Warner said.
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"A couple at retirement often requires four linked accounts, being an accumulation and a pension account for each partner."
The company points out that even when retired, an accumulation account is needed to take future contributions from any ongoing part-time work, or to hold assets exceeding the Pension Transfer Balance cap.
"This contrasts to APRA funds where the partners are usually not in the same fund, and where their accounts cannot be linked due to outdated administration platforms," it said.
"Further, shifting from MySuper into a retirement product is tedious with cumbersome paperwork."
Rice Warner said as APRA funds look to providing advice for their members, they are hampered by holding only a part of a member's financial assets, so any intra-fund advice does not capture enough information to do more than recommend moving out of accumulation into pension phase.
"Some APRA funds provide comprehensive financial advice, but they struggle to offer this cost-effectively, and at a price which members will pay," it said.
"The problem facing funds is the cost of delivery of this service and the heavy compliance risks. These costs usually exceed any revenue from the service which means they are subsidised by other members."
Rice Warner said despite this, members are still hesitant at paying for the advice even when it is delivered at a lower cost.
"This is an industry-wide problem which reflects poorly on the legislative and compliance regime for financial advice," it said.
"Even where a full pre-retirement plan is prepared for a couple, the member is simply moved into an account-based pension, but the partner is often left in their current fund's retirement product."
Rice Warner suggested that holding the superannuation assets of a couple within the same fund, such as an SMSF, materially improves the ability to facilitate the delivery of better financial advice.
On the investments front, Rice Warner said most APRA-regulated funds have a single diversified (balanced) fund shaped around MySuper.
"Some funds have introduced lifecycle investments and/or bucketing solutions to help members to manage sequencing risk, including sudden downturns in investment markets leading into and during retirement," it said.
"However, the absence of longevity products means that members still take on the risk of living beyond life expectancy as well as taking all investment market risks."
While Rice Warner believes a balanced fund is ideal for those saving for retirement, it is not optimum for retirement where people need several accounts for different purposes.
"Once again, this is easier to structure for a couple with all their pension assets held in one place. It is also easier to manage the tax situation," it said.
"It is well known that moving from accumulation to pension phase is not considered to be a CGT event, so deferred tax liabilities are released on retirement. Some APRA funds now pay a pension transfer bonus to partly compensate their members, but it is not as efficient as an SMSF."
Rice Warner said as APRA funds contemplate the changes needed for the forthcoming Retirement Framework, they should think about building a viable retirement service for their members.
"After all, if a highly fragmented segment can deliver something efficient, it should not be beyond the ability of those managing hundreds of thousands of members and tens of billions of assets," it said.