Australia’s superannuation pool is growing strongly despite the ageing of the workforce, with net contributions to the system increasing 20.7 per cent for the December quarter compared to the previous period in 2016, according to the latest APRA figures.
Contributions were up 12.4 per cent to $116.6 billion while payouts to retirees rose by 10.6 per cent to $74.2 billion despite the fact that increasing numbers of baby boomers are moving into retirement phase.
Industry superannuation funds recorded the highest growth with assets under management growing 18.2 per cent to $589.8 billion. Public sector funds followed at 9.7 per cent to $439 billion while retail funds grew more slowly, by 7.7 per cent to $613 billion over the year.
The growth of self-managed super funds continued to slow with the sector recording a 7.5 per cent rise in its asset base. However they remain the largest single segment, with $721 billion in assets, largely because their average balance is far higher than the other funds as a result of their attraction to high net worth individuals and business people.
Corporate funds continued to shrink over the year with their total asset base down 5.3 per cent to $54.6 billion. Corporate fund assets are shrinking because corporations are increasingly moving their super funds over to industry or retail funds and those remaining often have an ageing cohort with lots of retirees.
Equities remain the largest investment class for pooled super funds, accounting for 51.5 per cent of the $1.6 trillion investment base. Of that, 23.4 per cent was in Australian listed equities, 23.9 per cent in international listed equities and 4.1 per cent in unlisted equities.
Fixed income and cash investments accounted for 31.5 per cent of investments with 20.5 per cent in fixed income and 11 per cent in cash. Property and infrastructure accounted for 13.3 per cent of investments and 3.7 per cent was invested in other assets, including hedge funds and commodities.
Overall the superannuation sector has performed well in recent years with positive returns since 2012 and yearly returns to December 2017 at just under 9 per cent.
A clue as to why contributions are growing despite the ageing population and recent reductions in contribution caps made by the federal government lie in the statistics for default, or MySuper, funds.
These grew from 35 per cent of total super assets to 37 per cent of total pooled super assets in the December quarter 2017, compared to a year earlier. Because default funds are used by most of those in entry level jobs or jobs covered by industrial awards, their growing relative position is likely driven by increasing numbers of younger people joining the workforce.
Overall growth in MySuper products was the fastest of any asset class at 19 per cent. That again implies that balances in default super are growing more quickly than others.
Of the benefits paid out to retirees, lump sums accounted for $8.3 billion, or 49.8 per cent, and pension benefit payments ($8.3 billion) were 50.2 per cent of total benefit payments in the December 2017 quarter.
For the year ending December 2017, lump sum benefit payments ($38.5 billion) were 51.9 per cent and pension payments ($35.7 billion) were 48.1 per cent of total benefit payments.