SMSF or Public Offer Fund – what’s the difference?

An important part of financial planning is setting up a super fund, but it can be tricky to decide which suits you best. In this article, I’m going to outline the key features and differences between self-managed super funds (SMSF) and public offer funds.

As and advisory firm, we can help you with fund details and choosing a direction that suits your financial and lifestyle goals.

Fund membership

A SMSF can only have five or fewer members, all of whom must be trustees of the fund and take on regulatory compliance responsibilities. Due to this, many people who establish a SMSF enlist administrative services and seek expert advice. By contrast, a public offer fund has no member limit and, as its name suggests, can be joined by members of the public. There is usually one trustee who looks after all of the compliance and regulatory requirements.

Investment strategy

As a SMSF is self-managed, the investment strategy will be chosen to suit members’ retirement objectives. You should be mindful of the risks associated with any investments you make. Typically, there is less investment flexibility with a public offer fund, although choosing from a wide range of opportunities can usually influence your fund’s strategy, unlike a typical retail
super fund where you have no choice over investments.

Associated costs

A SMSF typically suits those with a larger fund balance due to the costs involved, especially if using legal or administrative providers. While members of a public offer fund can typically set up an account for free, but will then need to pay ongoing maintenance fees determined on a fund-by-fund basis.

Regulators

SMSF’s are regulated by the ATO, whereas public offer funds are subject to the Australian Prudential Regulator Authority (APRA). Unless administrative services are hired, SMSF’s require a much more hands-on approach as an auditor must be appointed, whereas public offer fund members are unlikely to interact with their regulator.

Fraud or theft

If a SMSF is subject to theft or fraudulent activity, its members are not able to receive any financial assistance from the government, whereas public offer fund members may be eligible for support. This is an important consideration when choosing the members of your fund and setting up your insurances.

If you would like to talk through the details of either a SMSF or a public offer fund, please don’t hesitate to get in touch.

Any advice is general in nature only and has been prepared without considering your needs, objectives or financial situation. Before acting on it you should consider its appropriateness for you, having regard to those factors.