Superannuation fund members are stumping up bigger voluntary contributions as the clock has begun ticking on changes that will see contribution caps pared back from July.

Colonial First State has reported that voluntary contributions for its FirstChoice super funds rose a massive 25 per cent for November above the previous month and were 20 per cent above the figure for November 2015.

Overall contributions for November and December, which include both voluntary and Super Guarantee payments, jumped a remarkable 35 per cent on the previous two months.

Colonial did not put figures on the increases as it doesn’t release monthly contribution numbers in dollar terms. However, FirstChoice is Australia’s second-largest fund with assets of $64.88 billion all up and $38.12 billion in accumulation mode, the phase in which voluntary contributions are made.

Given total personal contributions were $1.86 billion in the year to June 2016, or $155 million a month, the 20 per cent jump in November voluntary contributions would amount to a $31 million inflow boost for the month. If replicated across the whole super sector the gain in personal contributions for November would be $2.06 billion.

Colonial First State’s investments chief Peter Chun explained the rise as resulting from people rushing to boost contributions before both concessional and non-concessional contribution limits are cut in July.

“These are the largest changes to Australia’s super system in almost a decade and this spike in voluntary contributions reflects not only more confidence in the system, but a sentiment to act early and take advantage of this window before the new rules take effect,” Mr Chun said.

“We expect to see further increases in contributions as the June 2017 deadline approaches.”

The personal contribution rise is not restricted to Colonial. SunSuper spokeswoman Alice Andrewartha told The New Daily “we have seen an increase in personal contributions but it is difficult to say whether this is all due to the imminent reduction in contribution caps”.

Some will be asked

The fund is taking a case-by-case approach to the prospects created by the six-month window to take advantage of the old cap regime. “Our advisers are being proactive in talking to members of an age where they may have a need to make the contributions (45 and over).

Some are well placed to contribute. Photo: Getty

“It’s not just about age, we talk only to the people who are in a financial position to make contributions,” she said.

Daniel Wood, a financial adviser with Carnbrea, said the firm had not yet moved to contact clients about taking advantage of the six-month contributions window. “We put a hold on (promulgating) some of our strategies while the changes to the system were introduced.”

Now there is clarity about the detail of the new super system “we’ll start talking to clients soon about revising strategies. But we’ll be moving on a case by case basis”, Mr Wood said.

News of the jump in personal contributions follows on the heels of a steep fall of 12.65 per cent in voluntary superannuation contributions in the year to June 2016. That was seemingly driven by uncertainty created by the tumultuous reshaping and passage of the reforms by the Coalition prior to their passage through Parliament.

Personal contributions made by super fund members declined to $19.18 billion compared to $23.03 billion for the previous year. In June, the last month of the financial year when people often make decisions on voluntary contributions, the figure fell 10.3 per cent to $7.16 billion.

That decline was highlighted by this tabulation produced by research house Roy Morgan which shows voluntary contributions falling from 22.5 per cent of all contributions in the quarter to April 2016 to 19.6 per cent in the quarter to November.

Excess contributions

Mr Wood said those planning big contributions to super before the new system becomes law in July should be careful not to go over contribution limits. If you do the following penalties will apply:

Concessional caps: excess contributions are included in assessable income and taxed at your marginal tax rate plus a small interest charge. Up to 85 per cent of the excess concessional contributions can be withdrawn and any excess is counted toward your non-concessional contributions cap.

Non-concessional caps: excess can be withdrawn along with 85 per cent of associated earnings. The total amount of associated earnings will be taxed at your marginal rate and excess not withdrawn is taxed at 49 per cent.