Jeremy Cooper, chairman of the Government's review into the superannuation system, colourfully describes SMSF trustees as being "on the flight deck" - making the decisions about their retirement savings.

Cooper's point - made at last month's national conference of the Self-managed Super Fund Professionals' Association of Australia (SPAA) - effectively summarises how SMSF trustee/members only need to be concerned about their own interests because they are the only members in their fund.

But this extreme self-interest factor can act as something of a curse at times for a minority of trustees. These are trustees who don't make a distinction between their perceived immediate best interests and what is really the sole purpose of their super fund - to provide retirement benefits.

Another of the key speakers at the SPAA conference, tax commissioner Michael D'Ascenzo, gave a rather startling statistic that highlights the failure of some trustees to make this fundamental distinction.

Some 19% of SMSF contraventions reported to the ATO by approved auditors involved the lending of fund money to members or their relatives. Often, the loans provided extra cash-flow to prop up family businesses.

Superannuation law clearly bars a fund from giving direct or indirect financial assistance to a member or a member's relative. And members cannot provide guarantees for private loans of members and their relatives.

SMSF trustees are in a position to take advantage of investment opportunities that are generally unavailable to members of large APRA-regulated funds such as investing, where appropriate, in unlisted shares and direct property.

As Jeremy Cooper observed: SMSFs can adopt long-term investment horizons that are not "driven" by efforts to gain higher short-term rankings on fund league tables. And SMSFs could be operated in a tax-efficient way, particularly, Cooper said, in relation to transition-to-retirement pensions and the management of assets supporting a pension in retirement.

Yet one of the biggest challenges facing some self-managed fund trustees is in understanding the fundamental difference between their interests before and after retirement.

Author:  Robin Bowerman, Vanguard Investments Australia