Superannuation Investment Scams
Here at Financial Rescue, a majority of the clients we have seen over the last few years, have been unfortunate victims of superannuation scams. It was particularly common for these victims to have been involved in an off-the-plan property investment - gone wrong. The ACCC reported $26 million had been lost to superannuation scams in 2018. These losses accounted for 84% of total losses to investment scams.
Super scams often appear like an offer for consumers to access their superannuation funds early. People are told this is possible through a Self-Managed Super Fund (SMSF). This early access claim is often made by dodgy operators or rogue financial advisers. These dodgy advisers encourage people to shift the savings from their current APRA regulated Superannuation fund, into an SMSF. They convince consumers that by doing this, they can access more flexible investment options, with promised high returns. This unfortunately is not always the case.
Being told you can access your superannuation early, should act as the first warning sign to a superannuation scam. The truth is, depending on when you were born, you are legally unable to access your superannuation until you are between 55 and 60. Unless you qualify to access your superannuation under hardship circumstances, if anyone offers to give you early access to your superannuation, they are acting illegally.
The second trigger for caution is if they are convincing you to enter into an SMSF. Traditionally these types of operators targeted property investments through SMSF’s. They often do this through investment seminars, or newspaper advertisements, and encourage people to set up an SMSF to buy a property. They make enticing claims such as “guaranteed rent”, or “high yield returns” on the investment. These statements are however, often unsubstantiated, and many people have lost their entire superannuation savings to this type of scam.
These dodgy operators may also ask you to agree to a story, to ensure the early release of your superannuation funds. If this is the case, beware! We have seen dodgy financial advisers obtain these funds, and take out large fees from the released money. They may have convinced the person that they will be able to access the funds once they have set up the SMSF. Acting as a financial adviser for the fund’s rollover, the scammer steals a percentage, or all, of the funds. Often leaving people with nothing at all.
People who have fallen victim to these scams often didn’t understand the complexity of SMSFs and property investing and would end up breaching the superannuation laws while the spruiker skimmed a commission off the top.
To ensure you are being given legitimate advice, confirm that the person offering you advice has an Australian Financial Services Licence (AFSL). If they do not, they are not licensed to be able to give you financial advice. If you proceed with the advice of an unlicensed financial practitioner, it is often extremely difficult, if not impossible, to recover your losses in the event that you have fallen victim to an investment scam.
Proceed with caution into an SMSF, especially when purchasing off-the-plan property. A Self Managed Super Fund (SMSF) is a retirement savings mechanism in the form of a trust. Its purpose is similar to that of a regular superannuation account, but you have more control on how you can invest your funds in an SMSF. Your SMSF is still regulated by the Australian Taxation Office (ATO), so it is imperative that you have a full understanding of your legal obligations, as well as extensive financial planning and tax knowledge.
There are many complexities of operating an SMSF, which are most of the time, too complex and time consuming for regular investors with little experience to operate. The general set-up and operating costs of SMSFs are quite high, and generally only generate benefits for those who have a significant superannuation balance.
If you choose to go down the road of a Self Managed Super Fund to provide retirement benefits to you and your family, we recommend you seek the advice of a licensed, and qualified professional to ensure you have all of your responsibilities covered, and it is the most suitable option for you to achieve your retirement goals.
