A new KPMG report contains some interesting insights as to what the superannuation industry will look like in the future.
At almost $2.7 trillion in assets – based on 2017/18 APRA figures – the super sector continues its overall growth streak, although its composition looks to be shifting as we head towards 2020. While the APRA-regulated sector grew by 10.3% in 2018, SMSFs grew by 6.4%.
APRA-regulated super funds now comprise $1.8 trillion of the market, with SMSFs making up the remaining $750 billion. Drilling further into APRA funds, even before the Royal Commission, the industry fund sector increased total membership over 2018 to 1.39%. Retail funds, meanwhile, declined by 5.2% over the same period.
“Despite the increased volatility in the market and greater competitive pressures,” KPMG head of asset and wealth management Paul Howes explained, “the superannuation industry continued to deliver strong outcomes for members overall.”
“But with the Royal Commission Final Report released in the current financial year,” Howes continued, “it is likely that the trends identified in our review, particularly between the retail and industry fund sectors, will be exacerbated, driving materially different growth rates across these sectors.”
What are the predictions?
Looking forward, KPMG predicted that assets across the super industry will grow, albeit more slowly than previously “given the potential for an ongoing low-return environment and increasing outflows due to the ageing population and recent policy changes.”
10 years from now, KPMG expects the super sector to have grown to $5.4 trillion in assets. Of that total pool, KPMG said industry funds will hold the greatest share, overtaking SMSFs in FY20 due to the above factors and policy changes.
Effects on advice
We’ve previously discussed the Government’s Protecting Your Superannuation Package Bill, aimed at protecting against “inefficiencies that result from Australians inadvertently holding multiple superannuation accounts.”
Howes expressed concerns that this, along with the finalisation of Superannuation Prudential Standard 515 – Member Outcomes, FASEA and a raft of post-Commission reforms, will “potentially impact the number of members that receive advice.”
“This may have the impact of reducing the demand for pension products going forward and may result in more individuals taking lump sums out of the superannuation systems,” Howes, added, “which may put more pressure on the social security system, which is unlikely to be a sustainable long-term position for the Federal Government.”
In order for advisers to continue operating in the super sector, KPMG said funds will “have to review their advice models to ensure that they can continue to deliver advice to members in an efficient, affordable and compliant manner to facilitate the continued growth of the retirement income product market.”
