The decade just gone was one of remarkable change in the world of superannuation. Back in 2010 super was a kind of financial fairyland for the well-to-do but benefits in the system have been pruned since then.

Thanks to the largess of Treasurer Peter Costello a decade earlier, all super accounts went tax free for anyone over 60 who had gone into retirement.

There were some big balances swishing around in the system because Mr Costello had also allowed a one-off transfer of up to $1million into super in 2006 for anyone who had the kind of cash to fund it.

Even even after the $1million window closed, large contributions were possible because the contribution caps were so big.

For concessional caps the limits were $25,000 or $50,000 for those over 50 while non-concessional limits were $150,000 or $450,000 over three years.

Now concessional caps have been cut back to $25,000 for everyone and $100,000 a year or $300,000 for three years up front for non-concessional.

In 2017 the Turnbull government further squeezed big balances by placing a $1.6million cap on tax-free pensions and banning anyone who had reached that from making extra non-concessional contributions.

Source: APRA and ATO

MySuper arrives

During the Rudd-Gillard years, a series of financial reforms were introduced that resulted in the MySuper revolution that began from January 2014.

From that date all default super funds that receive the super contributions of those who don’t choose their own fund had to meet MySuper criteria making them low cost and efficient.

Most not-for-profit funds fitted the criteria anyway but one result has been the emergence of a range of new retail for-profit funds providing low cost options to members.

Ten years ago there were no MySuper funds but today they account for 28 per cent of all funds in the super system.

Borrowing balloons

Self-managed super funds are allowed to borrow to buy property and during the last decade this practice blew out dramatically. Back in 2010 SMSFs had $768 million in borrowings but by September 2019 this had blown out dramatically to $43.07 billion.

Regulators worried that was helping blow out the property boom that ended in 2017 and clamped down on it. Now none of the big four banks or Macquarie will lend for the purpose so total loans to SMSF are no longer growing.

Industry funds grow dramatically

The not-for-profit industry and public sector funds have grown dramatically relative to other fund types over the decade.

Industry funds now account for 25 per cent of super assets under management compared to 18.5 per cent 10 years ago. Public sector funds have grown also, to 23.6 per cent of the sector from 15.5 per cent.

The growth of the public sector funds has, to a degree, come because they have branched out from public sector workers to take contributions from anyone who wants to join.

Retail funds have lost relative position, accounting for 22.5 per cent of super assets compared to 30.6 per cent a decade ago.

SMSFs have slipped from 31.9 per cent of funds under management to 27 per cent.

Retail funds have sunk for a number of reasons including an ageing demographic, weaker relative returns and scandals emerging from the Hayne banking royal commission.

Public concern about those scandals saw $31 billion flow out of retail funds, mainly to industry funds.

Returns booming

When the voluntary superannuation system started back in 1992 it was expected funds would return about 3.5 per cent above the consumer price index [CPI].

However returns for the average balanced, or growth, fund used by about 80 per cent of members have far exceeded that target and for this calendar year look likely to return 14.5 per cent.

Indeed since 1993 when the system commenced there have only been four years of negative returns and 14 years of returns in double figures. Had funds been returning what was expected in 2019 they would have returned 5.2 per cent, not 14.5 per cent.

There has been one major difference in returns between for-profit and not-for-profit funds, however.

The average return for industry funds has been 7.2 per cent over 20 years while for retail funds it has been 5.4 per cent according to the Parliamentary Economics Committee.

The New Daily is owned by Industry Super Holdings