When I started my fund, tailored bank accounts for self-managed super funds (SMSFs) didn’t exist and, most probably due to laziness, I still today operate a transaction account and a high interest account with a major bank and have the pleasure of paying a $10 monthly fee. How times change quickly; with the frantic drive to grow deposits and perhaps a belated recognition that SMSFs aren’t going away, most banks now offer a special account.

Some subscribers have asked us at the Switzer Super Report to ‘road test’ these accounts – so here goes.

Comparing accounts

How to compare? Well, as is the case with many financial products, even a simple bank account can have nuances that may lead it to be more suitable to one type of SMSF than another. That said, there are some more general characteristics that we can compare, most particularly the interest rate, payment capability/functionality and ease of opening. All these new accounts are fee-free (why am I paying $10 per month?!), and all calculate interest daily and pay monthly.

The table below shows the two majors (Commonwealth Bank and Westpac) who offer tailored accounts (we are pretty sure the Melbourne banks will be in the market soon), and the three leading online banks.

Interest rates

If the interest rate is your key determinant, then UBank and RaboDirect are the clear leaders. UBank, with its bonus rate of 5.91% that is paid in any month in which no withdrawal is made, probably edges out RaboDirect. Of the majors, Westpac with its integrated ‘two account’ structure of a ‘working account’ and ‘savings account’ (the latter paying 4.5% on the whole balance) is better than Commonwealth Bank’s offering.

However, if your SMSF has more than two trustees or two directors of a corporate trustee – you can’t (yet) open an account with UBank!

Making transactions

If transactional ability is important to you, then it’s hard to go past the major banks. Due to their low-cost business model, the online banks usually require a ‘linked bank account’ for making payments or transfers out, and don’t offer BPay. This lack of payments capability when it comes to getting money out can become somewhat self-defeating for an SMSF because it means you will need to have an account with a major bank or other authorised deposit-taking institution (ADI), which may incur a monthly fee of around $10 per month.

UBank has attempted to address this and a linked account is not mandatory. It offers a ‘pay anyone’ facility, although this is capped at $20,000 per day and any payments in excess of this must be done via a linked account.

Ease of opening

ING deserves some credit for taking a slightly more enlightened view in relation to the documentation you need to produce to open a new account. They don’t require a certified copy of the SMSF trust deed and will accept any ATO document. Thank goodness someone is setting the lead here – their relatively easy and efficient account opening process is the reason most of my SMSF term deposits are invested with ING.

The gold star goes to…

Stars I hear? Well, if you are a small fund with payment (investment) parcels under $20,000 and don’t have more than have two trustees or directors, then UBank’s ‘USaver SMSF’ is unquestionably the ‘gold star’ recipient.

Funds with large transaction sizes may want to stick with the majors (Westpac leads Commonwealth Bank here), or alternatively, use one of the major banks for transactions, and open an online bank for those lumpy cash deposits. With the Government Guarantee of $250,000 per fund per institution, it is hard to go past those higher rates.

And for funds with three or four directors or trustees, it’s a ‘gold star’ for Westpac and RaboBank – although it will depend on how much cash you are going to keep on deposit.

One caveat – we have only looked at the measurable factors and haven’t considered the service experience you may have as a customer. How long does it take for your call to be answered? Can the staff actually help? How reliable is the online banking platform? How fast is it?

We would love to hear from you about your banking experiences, and also, any other insights you can share about your bank or credit union. This is an important issue for all trustees and we plan to keep track on how well the banks are doing. You can send your emails to questions@superreport.com.au.

Important information: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

Also in the Switzer Super Report

• Peter Switzer: It’s a tight race to finish in the black this fiscal year
• Lance Lai: Chart of the week: an engulfing bear emerges
• Rudi Filapek-Vandyck: The broker wrap: two buys and three sells
• Tony Negline: How to move a business property into your SMSF