SUPERANNUATION

Ask Paul: What are the pros and cons of an SMSF?

By Paul Clitheroe

November 12, 2025

Hi Paul,

Say I have $200,000 in super - is it better to invest in a self-managed super fund (SMSF) or in an industry fund such as Aware Super?

Of course, there are other factors we need to consider - as they say, the devil is in the detail - but what are the advantages and features of each? Which would be better long-term? - Harris

Ask Paul What are the pros and cons of a self-managed super fund (SMSF)?

Good question, Harris. I turned 70 recently. As one of my old uni mates told me cheerfully "welcome to your eighth decade". So my wife and are in the process of simplification - as well as clearing out the boxes of stuff we have carted from one house to another, having our finances nice and tidy is important to us.

We're both in great health, but at this age it is very obvious health issues can and do happen, so better to simplify while we have the enthusiasm and energy. This includes looking at our SMSF.

We've found this valuable over the decades as we could hold things such as private equity investments in it. Others may like to hold property in their SMSF, but we prefer the liquidity and returns from non-property investments in our SMSF. We own property outside of super.

A lot here depends on your age and what you plan to do. Sure, if you plan to use the $200,000 to gear into property, and you are a lot younger than us, an SMSF could well be the way to go. If you plan to hold a balanced portfolio of shares, managed funds or ETFs, an SMSF sounds like a waste of time to me.

I reckon it would cost you more than $2000 to set it up, then about the same annually in running costs. It is called a self-managed fund for a reason, you have to manage it.

It drives me nuts to see people setting up an SMSF, incurring big fees, then buying a typical balanced managed fund. A large super fund, such as the one you mention, can do this for you, with many investment options for very low fees.

A key rule with money is that fees are a certain cost, returns are not certain. So if it is a non-exotic investment strategy you are after, do it for the lowest cost possible with a large, low-cost super fund manager.

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The government has backed a Greens push to stop SMSFs using borrowed money to buy residential property, a move supporters say could help first-home buyers but critics warn will hurt retirement savers.