“Does our SMSF investment strategy still suit where we are now, especially if retirement is getting closer?”

Every SMSF needs an investment strategy. But the real question is whether yours still reflects what the fund and its members actually need.

Super law requires SMSF trustees to formulate, regularly review and give effect to an investment strategy that considers the whole circumstances of the fund. While there is no exact legal timetable, the ATO generally expects trustees to review it at least annually.

When should you review it?

An annual review is a good starting point, but some events should trigger another look.

These can include:

• a market correction
• a member joining or leaving
• a member starting a pension
• or a major change in the fund’s investments

The important part is not just doing the review. Trustees also need to document what they decided and why.

What should the strategy consider?

A sound investment strategy should look at:

• investment risk and expected returns
• diversification
• liquidity
• cash-flow needs
• the fund’s ability to meet current and future liabilities
• and whether insurance for members should be held

That does not mean every SMSF needs a perfectly diversified portfolio.

A fund may legitimately hold one property and a bank account, for example, but trustees need to explain why that mix remains appropriate for the members.

Retirement changes the picture

This is where investment strategy becomes more than a compliance exercise.

During the accumulation phase, many SMSFs are focused on growth.

Once members move into retirement and start drawing pensions or lump sums, cash flow and liquidity become much more important.

A strategy that worked when nobody was withdrawing money may stop working once minimum pension payments need to be funded each year.

That can become a real issue where most of the fund is tied up in illiquid assets such as property, unlisted companies or trusts.

Think beyond the tick box

The point of the investment strategy is not just to keep the auditor happy.

It is to make sure the fund can actually do what it was created to do: support members in retirement.

That means asking whether the current asset mix still suits:

• the members’ age
• retirement timing
• income needs
• risk tolerance
• and liquidity requirements

Final thought

Your SMSF investment strategy should evolve as your life and retirement needs change.

If it has been sitting unchanged for years, now may be a good time to review whether it still makes sense.

Speak with your Aspen advisor if you would like help checking whether the strategy still fits the fund’s current position and future plans.