Why we have taken our own unique approach to SMSF pension templates

11 Feb 2021

Meg Heffron

Managing Director

Are you like me and tired of the rhetoric from the big end of the superannuation town that always portrays SMSFs as slightly dodgy, overpriced fashion accessories that people with too much time and money like to have?

Join our newsletter

If you are, you’ll have taken some comfort from the work on fees that the SMSF Association published last year. It at least addresses the “overpriced fashion accessory” element. But despite years of positive noises from the ATO and various government reviews that the SMSF sector is well functioning and compliant, we do still have that “slightly dodgy” tag from time to time. 

One accusation that I’ve always particularly disliked is that we “always backdate documents” in SMSFs.

I dislike it because most people actually don’t do that most of the time nor want to. Trust deeds, binding death benefit nominations, investment strategies, financial statements – all these documents are almost always signed in real time and in fact many are signed digitally these days which makes it pretty obvious when they were signed. 

The one area where we fall down unnecessarily is pension documents. I have spoken to many of you about this and know it's an area of frustration for you and doesn’t match the reality of the service you provide. With this in mind it’s something we set out to change when we designed our latest addition to the Heffron Super Toolkit – pension documents (launching later this month). 

The way our industry seems to work is that documents are often prepared well after the pension started but written as if they were signed in real time. We do it for good reasons – we want the pension documents to contain lots of information that is useful in the future (for example, the exact value of the pension when it started, the tax components of the pension account etc). But we’re in a bind because these details aren’t known until months later (often when the next financial statements were prepared).

In fact, we should be writing the documents in a way that reflects reality: in (say) May 2021, an adviser might advise the client to start a pension from 1 July 2021. The client and adviser meet in June and the decision is made. Now all that needs to happen is the accountant or administrator must prepare the pension documents once the figures are known. Documenting this properly means we should tell exactly that story – a decision was made, terms were agreed in June, the pension started in July and final details were known and noted down in December.

That’s why we’ve designed our new tool that way. We help guide our users through several options – are they recording the decision now but won’t know the final figures until later? Are they documenting everything now but ratifying a decision that was made some time ago? Are they actually in a situation where they don’t need to wait until they know how much the member has in their account? We accommodate all these options. We know accountants and advisers want to make it clear they’re not backdating documents but also reflect the reality that no-one knows their SMSF account balance on 1 July.

To be honest it was easier than I thought and it makes so much more sense to clients.

To learn more about the Heffron Super Toolkit follow this link.