SMSFs Chase Yield: TermPlus Offers 8.50% But Risks Warrant Scrutiny

SYDNEY, AU – May 20, 2026 – As trustees of Australia's burgeoning A$1.06 trillion self-managed super fund (SMSF) sector hunt for returns in a complex market, a new breed of investment product is stepping into the spotlight. Offering a target rate of up to 8.50% per annum, TermPlus, a fixed-term investment account powered by ASX-listed Pengana Capital Group, is making a direct appeal to retirees and investors struggling to generate meaningful income from traditional sources.

With allocations to cash and term deposits within SMSFs falling to a record low of 16.3%, the appetite for alternatives is palpable. This shift comes as Australia's 663,867 SMSFs, representing over 1.2 million members, seek to bolster the income-generating side of their portfolios. The launch of such high-yield products marks a pivotal moment, presenting both a compelling opportunity and a need for careful consideration.

The Allure of High Yield in a Trillion-Dollar Market

The driving force behind the interest in products like TermPlus is the persistent search for yield. For years, SMSF trustees, a demographic with a median age of 62, have relied on a mix of Australian equities, property, and cash to fund their retirement. However, with interest rates on traditional savings and term deposits failing to deliver the desired income, many are looking further afield.

This environment has created a fertile ground for financial innovation. TermPlus, managed by Pengana Credit Pty Ltd, aims to fill this gap. The product is structured as a managed investment scheme, making it accessible not only to SMSFs but also to individuals, companies, and trusts with a minimum investment of just A$2,000.

Pengana Capital Group (ASX: PCG), the parent company, is an established player in the Australian funds management industry. Founded in 2003, the firm reported A$3.67 billion in funds under management as of April 2026 and has a track record of consistent dividend payments, lending a degree of institutional stability to the offering. The firm has also been transparent about its strategic pivot towards private market assets, a category that includes the investments underpinning the TermPlus accounts.

Deconstructing the Offer: How TermPlus Works

TermPlus presents a simple proposition on its surface: a high-yield fixed-term account with no setup, transaction, or monthly fees. Investors can choose from one, two, or five-year terms, with target rates that float above the official Reserve Bank of Australia (RBA) cash rate.

As of May 2026, with the RBA rate at 4.35%, the target rates are:
* One-Year Term: 7.35% p.a. (RBA cash rate + 3.00% fixed spread)
* Two-Year Term: 8.00% p.a. (RBA cash rate + 3.65% fixed spread)
* Five-Year Term: 8.50% p.a. (RBA cash rate + 4.15% fixed spread)

The fixed spread remains constant for the duration of the chosen term, while the RBA-linked component may fluctuate. Income is calculated daily and paid to investors monthly, with the option to either withdraw the cash or reinvest it for compounding returns. This structure is designed to provide the predictable, regular income stream that many retirees and SMSF trustees covet.

According to the company, investors can track their portfolio through a digital dashboard, simplifying the administrative burden often associated with SMSF compliance. This ease of use, combined with the eye-catching rates, has helped the product gain traction, earning it finalist nods at the 2026 Finnies Awards and the Fund Manager of the Year Awards.

Behind the Rate: A Look into Global Private Credit

The engine generating these high target rates is the global private credit market. The TermPlus portfolio is invested across more than 4,500 individually negotiated loans to mid-market companies, typically with annual earnings between US$50 million and US$250 million. These loans are primarily concentrated in the United States and Western Europe, with all currency exposure hedged back to Australian dollars.

For decades, private credit—lending directly to companies outside of public bond markets—was the exclusive domain of large institutional investors. It offers higher potential yields as a trade-off for lower liquidity, an arrangement known as the "illiquidity premium." Products like TermPlus aim to democratize this asset class, giving retail and SMSF investors a pathway to participate.

The portfolio's construction is guided with input from Mercer, a leading global investment consultant, which adds a layer of institutional-grade oversight to the investment process. By investing in a diversified pool of loans, the fund aims to mitigate the risk associated with any single borrower defaulting.

Understanding the Risks: Not a Bank Deposit

While the target rates are attractive, it is critical for investors to understand that TermPlus is not a bank. The investments are not term deposits and are not covered by the Australian Government's Financial Claims Scheme, which guarantees deposits up to A$250,000 per person per institution.

As a managed investment scheme, TermPlus carries investment risk. The Product Disclosure Statement (PDS) clearly states that the target rates are an objective, not a guarantee, and that investors could lose some or all of their capital. The primary risks stem from the underlying private credit assets.

• Credit Risk: The fundamental risk is that the companies borrowing the money may default on their loans. While diversification helps, a widespread economic downturn could increase default rates across the portfolio. Recent analysis from firms like Fitch Ratings has highlighted rising defaults in some segments of the private credit market as higher interest rates pressure corporate balance sheets.
• Illiquidity Risk: Private loans cannot be easily sold. While TermPlus offers fixed terms of one to five years, the PDS notes that investor withdrawal requests are subject to the fund's available liquidity and could be delayed or suspended, particularly during periods of market stress.
• Valuation Risk: Unlike publicly traded assets, private loans are not priced daily. Their valuation is more complex and less transparent, which can mask underlying performance issues until they become significant.

Despite these risks, early adopters have expressed satisfaction. David C, a 78-year-old SMSF trustee from South Australia, noted in a review on the company's website that he considered the product "an excellent means of diversifying," having opened multiple accounts to stagger maturity dates. Another reviewer, Charles S, praised the simple application process and monthly returns for his SMSF.

Ultimately, TermPlus represents a significant shift in the investment landscape available to Australian SMSF trustees. It offers a compelling solution to the income drought but does so by introducing a different set of risks compared to traditional, government-guaranteed products. For trustees, the decision to invest will require careful due diligence and a clear understanding of how such an asset fits within a well-diversified retirement strategy.