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Industry funds are set to grow fastest says Roy Morgan

A young membership will drive industry fund growth.

A young membership will drive industry fund growth. Photo: Getty

Industry funds are placed to be the fastest growing sector of the superannuation market according to new research from Roy Morgan. This will be driven by a combination of two factors, the fact that they have the largest membership base and their members have the youngest age profile of any sector, the group’s new 2017 edition of its ‘Superannuation & Wealth Management in Australia’ report.

Of the 13.4 million Australians aged 1 and over with superannuation, 6.8 million (50.7 per cent) are members of an industry fund. This is well ahead of retail funds with 3.9 million (29.1 per cent) and all other types combined (including self-managed funds) which make up only 2.7 million.

This big lead in membership numbers by industry funds gives them the greatest growth potential if these members can be retained through to retirement.

Younger age profile of industry fund members increases long term growth prospects

The median balance of industry fund members is currently $38,500, which is lower than the market average of $57,800. However Roy Morgan said this is largely a result of the lower median age of industry fund members.

The current median age of industry fund members is 39.6 years, which is significantly lower than other superannuation types, giving them the best long term growth potential as funds will grow as members age. Self-managed superannuation fund members (SMSFs) have the oldest median member age with 59.0 years, followed by public sector funds (49.6 years) and retail funds (45.7 years).

“Although industry funds have the greatest long term potential, there are a number of challenges to achieving this, particularly over time as balances increase,” said Roy Morgan communications director Norman Morris. 

 As balances grow members will be more inclined to use of financial planners who “often have a leaning towards their own funds or other retail funds and move away from industry funds. Another major issue is the challenge of high balances moving to SMSFs which impact retail and industry funds,” he said. 

“Engaging young people is the key to maximising their lifetime potential in this industry,” Mr Morris said. However this can be difficult as young people have other more immediate priorities like saving for a home, he said.

“For young people to become more engaged in superannuation they are likely to need financial advice and education but this has proven difficult in the past because of cost, the level of interest and trust. The poor rating in the overall population for financial planners regarding their ethics and honesty from the Roy Morgan ‘Image of Professions’ survey is likely to prove a barrier to their wider use.”

While industry funds have more members they have lower overall funds under management than retail funds and SMSFs.

SMSFs, with their older and more prosperous membership, have $701 billion under management while retail funds have $590 billion and industry funds $560 billion according to APRAs latest figures.

The New Daily is owned by industry super funds

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