A common rule of thumb in the superannuation industry is that you should have $200,000 in superannuation benefits prior to establishing a Self Managed Superfund. The premise for this recommendation presumably lies in the apparent costs associated with setting up and running a SMSF.

These costs are considered to be "on average" $500 to set-up your SMSF and $2,000 per annum in annual running costs. This results in a SMSF running cost of around 1% per annum which is considered reasonable in today's marketplace.

The one major flaw in the above analysis is that no one pays an average fee. They pay an actual fee. And this fee can be dramatically lower than what most superannuation experts would have you believe.

The advent of the Internet has dramatically altered the way services are provided to consumers. Consider that the online brokerage business now offers internet share trades at fixed fees of $30 or less per trade. Before the internet the same trade would cost more than $100.

The same pricing opportunities now exist in many other markets including the SMSF market.

ESUPERFUND currently has a free setup fee and a fixed annual fee of $699. This equates to an annual running cost of 0.35% on a $200,000 super benefit. Not many Retail Funds can claim that. Using the marketplace norm of 1% per annum as an acceptable fee ratio would imply you could setup a SMSF with ESUPERFUND with as little as $60,000.

Curiously however whilst a 1% rule of thumb is used in the SMSF industry there are not too many Retail Funds or Corporate Funds that can claim costs that low.

A recent study by Deutsche Bank published in Personal Investor magazine stated that the average Retail Fund cost ratio was 2.11% per annum and the average Corporate Superfund cost ratio was 1.73% per annum. Based on these costs you could justify establishing a SMSF on cost alone with a super balance of around $30,000.

Ultimately the amount you need to establish a SMSF is a personal decision. Issues other than cost should be considered including the level of control you want over your Super Benefit. Importantly however do your own research and don't take averages as a guide. The averages simply tend to disguise the truth.