Pooled vs Segregated Assets
The assets of a Self Managed Superannuation Fund can be pooled or segregated. A pooled investment strategy is where no assets of the Fund specifically relate to any particular members account, or any phase that the member may be in (i.e. accumulation or pension). Whereas, a segregated investment strategy is where specific assets can be related to each member’s account, or each phase that the member may be in.
Neither way is necessarily better than the other. Whether the trustees of a Fund decide to pool or segregate assets will be determined by the circumstances of the Fund.
Assets of a Fund will often be pooled where all members of the Fund are in the same phase and where they are all willing to invest in the same types of assets with a similar degree of risk. For example, a situation where the members of a Fund are husband and wife in retirement and both would like to invest in secure income producing assets (fig. 1); or three young siblings who own a factory within their Fund that their family business operates from (fig. 2).
Fig. 1
| Member |
Phase |
Balance |
Assets |
| Husband | Pension | $800,000 | Term Deposits – $500,000 / Conservative Portfolio – $1,280,000 |
| Wife | Pension | $980,000 | |
| Total |
$1,780,000 |
$1,780,000 |
| Member |
Phase |
Balance |
Assets |
| Sibling 1 | Accumulation | $400,000 |
Factory – $1,360,000 |
| Sibling 2 | Accumulation | $650,000 | |
| Sibling 3 | Accumulation | $310,000 | |
| Total |
$1,360,000 |
$1,360,000 |
A segregated investment strategy is often adopted when there is a disconnection between the phases of each member’s lives, or where their investment preferences differ. This may occur where the members of the Fund are a father and a daughter. If the father is in drawdown phase, he may want his member balance to be made up of stable income producing assets, whereas the daughter, being in accumulation phase, may prefer to have her balance made up of equities.
Fig. 3
| Member |
Phase |
Balance |
Assets |
| Father | Pension | $1,600,000 | Term Deposits – $300,000 / Conservative Portfolio – $1,300,000 |
| Daughter | Accumulation | $500,000 | Australian Equities – $350,000 / International Equities – $150,000 |
| Total |
$2,100,000 |
$2,100,000 |
Segregating assets of a SMSF is uncommon because of the additional administration, documentation and costs associated. Pooling assets makes it much easier to prepare the financials of the Fund and therefore reduces the costs.
There is also different tax treatment of income received from assets depending on whether the assets are segregated or not. Take figure 3, above. If the assets are segregated the income received from the term deposits and conservative portfolio are received tax free, whereas the income received from the equities are taxed at 15%, with any franking credits rebated.
However, again looking at figure 3, if these assets were pooled rather than segregated the total income received from the term deposits, portfolio and equities would be added up and then tax would be applied based on the proportions of each account. This is determined by an actuarial certificate, which notifies the trustees of the percentage that is exempt from tax (Pension phase) and the amount that is taxable (Accumulation phase).
The benefit of having segregated assets is that pension accounts will generally have a higher degree of income producing assets, whereas an accumulation account may focus on more growth orientated assets. Therefore, by segregating assets, a trustee could ensure that the vast majority of the income is received tax free, rather than being taxed according to the proportions of each phase/account. The benefit of this needs to be weighed up against the additional administration and costs required to segregate assets.
