Millennials are boosting their position in the superannuation stakes, more than doubling their share of the total super pie over the last 10 years, according to the latest figures from Roy Morgan.
The research house found that millennial super balances were up $226 billion or 382 per cent, well ahead of the overall market growth over this period of 110 per cent. That is being driven by the ageing of millennials who are building balances with more years in the workforce, Roy Morgan director Norman Morris said.
Millennials are building balances quicker that previous generations as they are enjoying higher levels of superannuation guarantee rates. Currently the rate is 9.5 per cent and is heading for 12 per cent by 2025.
The result of the growth is that millennial balances now make up 14.6 per cent of total super balances of $2.2 trillion compared to 6.4 per cent of a pool of $1.04 trillion.
The older generations which have been the major strength of superannuation fund growth, are now showing declines in market share, with Baby Boomers down 12.1 per centage points over the last decade (to 39.7 per cent) and Pre-Boomers down by 6.8 per centage points (to 7.5 per cent).
The decline in the position of older generations comes as those cohorts move into retirement, stop saving and start spending their superannuation balances.
The research also found that satisfaction with industry funds was ahead of satisfaction with retail funds for all generations except for Generation Z, where retail funds lead.
Satisfaction levels with super generally falls as the age of those surveyed declines. That decline with the younger generations is associated with their lower average superannuation balances,Roy Morgan believes.
The average balance for Pre-Boomers (the oldest group) is $289,400 and it gradually declines to $16,600 for Generation Z (the youngest generation). The average balance held by Millennials currently is $59,500, well up on their average of $17,300 in 2007.
“It is a major challenge for superannuation funds to engage the younger generations in a long term issue such as superannuation, when they are most likely to have shorter term priorities such as housing affordability and lifestyle,” Mr Morris said.
“This research has shown that due to the compulsory nature of superannuation, Millennials, Generation Z and Generation X are where the greatest growth potential now lies.”
“The very low satisfaction levels among the younger generations of around 50 per cent are likely to lead to low brand loyalty and engagement. Industry funds with their higher satisfaction levels should have a growth advantage over retail funds if this lead in satisfaction with performance can be maintained.”
“A major threat to both industry funds and retail funds are self-managed funds which have much higher satisfaction and average balances and are currently the biggest sector of the market. Retaining and attracting high balance superannuation members therefore represents a major challenge to both retail and industry funds,” Mr Morris said.
SMSFs are generally considered to be suitable only for those with balances of at least $250,000 with at least $400,000 necessary to achieve proper levels of diversification in investments.
*The New Daily is owned by Industry super funds