Industry superannuation funds are set to take the lion’s share of accumulation funds under management by 2028 as a result of a growing workforce.
A report by research group DEXX&R says the growth in industry funds will help drive the overall growth rate in total superannuation funds in accumulation phase by an annual rate of 6.1 per cent, to $3.08 trillion at December 2028.
The projected growth rate has been reduced from the 6.5 per cent shown in last year’s report, the group said.
Industry funds will account for $1.3 trillion in accumulation funds under management.
The second strongest in growth terms will be public sector funds which, like industry funds, are not for profit.
They will account for about $750 billion by 2028.
Accumulation funds are made up of the super accounts of people in the workforce whose employers make contributions under the superannuation guarantee.
Retail, or for-profit, accumulation funds will account for about $650 billion by 2028. The retail category is a combination of the employer and personal bars on the chart.
Personal super covers the extra contributions made by individuals and contributions by the self-employed, while employer super represents payments to retail funds under the super guarantee.
Growth in the retail sector is being driven by relationships between members and investment advisers.
The situation for funds in pension mode, which are making payments to those who have retired, look quite different. There, self-managed super funds dominate with about $500 billion currently under management.
However, SMSFs are not expected to grow much, with the estimate being around $625 billion by 2028 – a growth rate of 2.2 per cent annually.
Industry funds, however, will more than double from $65 billion to $180 billion, Mr Kachor said. That is a growth rate of 10.27 per cent annually.
Public sector funds are expected to increase about 20 per cent in pension phase, while retail funds will grow about 46.7 per cent to $300 billion.
Overall funds in pension phase will grow at an annual rate of 4.3 per cent to $1.27 trillion, Mr Kachor estimates.
Retail funds in pension mode are projected to grow at an annual rate of 6.7 per cent, to $304 billion in December 2028.
The rich are bailing
Pension funds have experienced significant outflows in the past two years, as wealthy people move money into other areas as a result of the introduction of the $1.6 million cap on pension funds.
“The introduction of the $1.6 million cap has triggered large outflows for the second consecutive year in the retirement incomes sector. This increase in outflows, a net $15 billion in calendar 2017, was initially treated as a one-off response to the introduction of the cap,” the report said.
“However, outflows continued at a higher-than-expected rate, reaching $9 billion in calendar [year] 2018. Projected outflows are now expected to normalise over the next three years.”
Non-super savings are predicted to have the highest growth of all market segments including super over the 10 years to December 2028.
Retail funds under management are projected to increase from $211 billion at December 2018 to $410 billion at December 2028.
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