Hands-on super takes off

DIY super is tipped to become the fastest growing kind of super account, outstripping even industry funds.

Hands-on super takes off

SELF-MANAGED funds are forecast to be the fastest growing type of super account in the country, outperforming even the booming union-backed industry funds sector.

Not only will the rate of new accounts be higher than any other type, these accounts will also have the most money.

DIY funds are set to have a whopping $490 billion under management in the next four years, when they will displace the current No.1 -- retail funds.

However, the true depth of the DIY surge will come to the fore in about 15 years by which time self-managed funds will have a staggering $1.5 trillion in them, compared with just $945 billion for their closest rival.

The latest forecasts come from the Deloitte actuary Trowbridge Deloitte. The firm projected the future size and split of the Australian superannuation industry up to 2021.

Trowbridge managing partner Andrew Gale said that more than one in every three superannuation dollars will be in a DIY fund in the next 15 years.

One of the reasons for the massive growth in this sector is the desire for people to take control of their money and the desire to make their own investment decisions.

However, the dramatic rate of growth also signals many people will also be actively swapping out of existing funds and transferring into DIY funds.

According to Mr Gale this swap rate is expected to multiply prior to leaving work. People will transfer their super out of one of the other fund types and into their newly created DIY fund just before they start retirement.

Self-managed funds are predicted to almost double in size in the five years leading up to 2021, when they will hold the "lion's share" of all super funds under management, Mr Gale said.

Financial adviser RGA Group director Robert Gibbs said the boom in self-managed funds was being driven by a feeling of not having control.

"First and foremost, people say they want to feel in control. They think to themselves, 'right, a DIY fund, now I'm in control'," Mr Gibbs said.

"They want to make their own investment decisions and direct property is probably one of the biggest reasons for this.

"The one thing you really can't put into any other fund other than DIY is property.

"Australians have a love affair with property. They can see it, touch it, know exactly where the money is.

"There is also an ethical part of the DIY decision. For example, if they don't want to have anything to do with guns or uranium. With a DIY fund they feel they can exercise that decision.

"However, what happens in as much as 40 per cent of the cases with DIY funds is that the money ends up sitting in cash in a bank somewhere and the returns are being eroded by inflation.

"The biggest problem with running a DIY fund is that people don't then seek professional advice. That means they often end up with inappropriate super structures and totally inappropriate investments," Mr Gibbs said.

"I believe there are a lot of ticking timebombs out there.

"Most of the collapses and disasters we've seen recently have been people in control of their own destiny and making bad investment decisions."