Aussies have yanked more than $13 billion out of the nation’s biggest super funds in the past 12 months and slapped it into self-managed systems in a colossal shake-up of the retirement system that could leave many of them at risk of losing it all.
Exodus to Self-Managed Funds Nearly Doubles
Bombshell new analysis by Elula, an Australian-owned AI software company focused on customer retention and engagement in the financial services industry, shows the exodus to self-managed fund accounts (SMSFs) has nearly doubled compared with the previous financial year. In 2025, SMSFs captured just 10 per cent of switchers. Over the previous year, it has rocketed to 17 per cent, marking an accelerating trend towards self-directed retirement management.
Josh Shipman, co-founder and Chief Executive Officer at Elula, said the data shows the SMSF movement has shifted from retail-led to industry-led. Industry funds are giant, profit-for-member funds (like AustralianSuper or Hostplus), whereas retail funds are run by financial institutions or banks (like AMP). Mr Shipman said the large “default-scale funds” — the giant, trusted market-leaders — are now facing a “growing self-directed member exit problem”.
“For large super funds, the warning sign isn’t the dollars alone. It’s that more members are actively choosing self-management,” he said. “When billions of dollars are leaving professionally managed funds for SMSFs, it raises important questions about engagement, trust and member expectations.”
Why Aussies Are Switching to DIY Funds
According to Elula, Aussies are making the switch for three main reasons. Firstly, they want direct control over where their retirement savings are invested, including individual shares, ETFs, property, private investments and alternative assets. SMSFs provide greater flexibility than many large super funds. Secondly, they feel they could achieve better outcomes by managing investments themselves or working with a trusted adviser. Thirdly, they feel most funds do not engage with their members, or if they do, it’s generic. A lack of personalised engagement, or feeling disconnected from a fund provider, leads members to explore alternative paths.
Mr Shipman said artificial intelligence is becoming a critical capability for superannuation funds and many Aussies are making a switch because of it. “With millions of members and billions of dollars under management, it is no longer practical to rely on broad-brush engagement strategies,” he said. “Funds need to identify which members are at risk of leaving, understand why, and engage them with the right message at the right time. The industry is moving from reactive retention to proactive retention, and AI is the technology making that possible.”
“In a world where more than $13 billion is walking out the door to SMSFs each year, retention can no longer be treated as a back-office function. The funds that use AI to understand, engage and retain members proactively will be the funds that win.”
Couple Loses It All
Elula says many Aussies are going it alone because they are attracted by the perceived benefits of control without fully appreciating the administrative burden involved. Running an SMSF requires ongoing compliance, record keeping, annual financial statements, independent audits, tax returns and trustee responsibilities. While SMSFs can be cost-effective for larger balances, many members are surprised by the ongoing expenses associated with administration, accounting, audit, tax and regulatory compliance. Unlike retail or industry super funds, you or any other trustees are responsible for running the fund, making decisions about the fund, and making sure the fund remains compliant.
news.com.au has previously reported on SMSF horror stories, including a Brisbane couple that lost almost all their superannuation – totalling $580,000. Sharon and Kevin Doolan were fed promises they would rack up an extra $100,000 before retirement and were sold on the easy move in 2023. But within two years, the company managing their money collapsed.
“We wanted to retire this year or next year and now because of this we can’t. It’s brought a lot of anxiety,” Mrs Doolan told news.com.au. “We both feel hopeless. We are not going to have a comfortable retirement. I think we’re going to be living on $100,000 in total. It has got to try and keep us for however long we live. That scares me.”
UNSW associate professor and superannuation expert Katja Hanewald said SMSFs are legitimate and can be good for some Australians. “But they involve a lot of legal responsibilities for compliance and investment decisions, and it is a huge time commitment,” she said. “There can be problems when people are encouraged or advertised to move into self-managed super funds without fully understanding what it involves (and) what the costs are.”
All the Risks Involved
The government’s Moneysmart website outlines all the risks associated with shifting your super into a self-managed fund. Here’s what you need to know:
- No government safety net: If the fund loses money through theft or fraud, you will not have access to government compensation that applies to industry or retail super funds.
- Ultimate legal responsibility: Trustees are always legally responsible for the fund’s decisions, even if you use an adviser, accountant, or lawyer. This includes decisions made by other trustees, even if you’re not involved in making the decision.
- DIY performance: Investment returns depend entirely on the decisions made by the trustees.
- The “life happens” factor: Life changes, such as illness, relationship breakdown, death, or moving overseas can add massive complexity and affect how trustees manage and control an SMSF. These events often force the need to wind up (close) the fund entirely.
- Lost insurance: Moving to an SMSF may mean losing the automatic life or TPD insurance you had with your old industry or retail super fund.
- No standard avenue for complaints: Complaints cannot be lodged with the Australian Financial Complaints Authority (AFCA) against SMSFs (meaning members can’t sue the fund itself via an ombudsman). SMSF trustees can only lodge complaints against third-party financial firms that provided them with bad financial advice or services.
— with additional reporting from Sarah Sharples
