Industry funds have caught up with retail funds over the past decade, and now there is an even split between the two at the top end of Australia’s super system. But while large funds are getting larger, there are still too many smaller ones which need to be consolidated.
Industry funds have caught up with retail funds over the past decade, and now there is an even split between the two at the top end of Australia’s super system.
But while large funds are getting larger, there are still too many smaller ones which need to be consolidated.
These are the headline findings from KPMG’s Super Insights Dashboard and Report, released today – an analysis of the super system as it reaches its 25th birthday.
The last decade has shown a migration of market share from retail to industry funds with corresponding increase in Assets Under Management (AUM) by industry funds. From 2004-2016, retail funds declined in market share from 43 percent to 29 percent – it is now virtually one third retail, one third industry/public sector and one-third SMSF.
Paul Howes, KPMG Head of Wealth Advisory said: “Industry funds are no longer the challenger – they are now the incumbents. Judged by both AUM and the number of accounts held by funds they are the equals of the retail funds, whose cash flows are relatively weaker and whose lead in number of members is falling.
“At a macro level, the sector is effectively reshaping from its traditional divide between retail, industry and corporate funds to a converging grouping based on the level of AUM and complexity of operating model and offerings.”
KPMG’s online Super Insights Dashboard is a combination of leading analytics applied to a proprietary dataset including 10 years of Australian Prudential Regulation Authority (APRA) and Australian Taxation Office (ATO) published statistics.
The analysis contained within the interactive tool contains the following findings:
Paul Howes said: “The large funds, in the main, continue to grow. They are supported by a big member base, strong Superannuation Guarantee (SG) inflows and outflows still racking at the lower end of the range, due to concerns about longevity of funds in retirement.”
“It is important to note that the current 9.5 percent compulsory employer contribution is not set to build sufficient assets to provide the 65 percent of working income considered adequate for retirement. But our analysis shows that, given the SG increases set to come in over the next 8 years, a person on average earning who starts their career after 2006 and worked for 40 years would retire with a balance of $545,000, a level agreed to be enough for a comfortable standard of living.”
He added: “A positive finding for retail funds was that they lead the way in closing the gender gap in post-retirement outcomes for women members, and this is to be applauded. The lifetime income penalty paid for a broken employment history ends up reflected in too many women’s super balances.”
KPMG argues that while the analysis shows an overall success story – with $2trillion AUM – the industry now needs to switch its attention to post-retirement outcomes.
Paul Howes said: “The industry has done a good job in the first 25 years of compulsory super in the accumulation phase of superannuation – but it has not yet worked out its approach to an environment where more members become income recipient rather than fund contributors.
Funds will have multiple audiences, members will have higher ages and more funds will have outflows that exceed inflows. That is the next challenge. We would encourage more funds to consider the idea of appointing a Chief Retirement Income Officer with responsibility for delivering retirement income to members while the Chief Investment Officer is free to concentrate on maximising investment returns.”
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