With the new framework now in place since 2013, APRA’s superannuation reporting framework is starting to reveal some interesting information about our industry. APRA is now publishing more extensive statistics on a quarterly basis, and they released their report for the March 2016 quarter recently.
There are a few trends apparent in the report, and it’s worth making some comments on them.
Key statistics for the superannuation industry as at 31 March 2016:
Key statistics for entities with more than four members for the year ended 31 March 2016:
Despite a small fall in superannuation assets over the past year, there was still $2 trillion in superannuation at the end of March. In large measure, this is because of negative returns; funds with more than four members returned -1.5%pa.
Comparing retail and not-for-profit sectors
Much performance commentary focuses on a comparison between the different segments, but the market share of the different sectors is quite stable. 42% of assets are in not-for-profit funds (industry, public sector and corporate), and 29% in both retail funds and SMSFs; with 70% of contributions going to not-for-profits and 30% to retail.
Not-for-profit funds have continued to deliver higher long-term returns but it will be interesting to see if this trend continues – the removal of commissions from super, the financial advice reforms (FoFA) and the ongoing implementation of MySuper might result in some convergence.
Over the past eleven years, large APRA funds have had net returns of 5.8% (6.7% for not-for-profit funds and 4.8% for retail funds).
The slow transition to MySuper
By 1 July next year, all pre-MySuper accounts have to be moved to another super account, such as a MySuper account. Even though this transfer process has been underway since 2013, there is still $43 billion of super still to be transferred. This is over 2% of all the money in super. While some of these products deliver high fees, there are also some tricky admin issues to be addressed, and it will be interesting to see if these can be resolved in time.
Over the past year, there has been a 34% decrease in the value of these accounts and a 7.7% increase in the value of MySuper products. Almost a quarter of all super – $453 billion – is now in MySuper products.
The rising levels of benefit payments, and the risks of being cash flow negative
An interesting and emerging trend is the growth in super benefit payments. While $104 billion of contributions were received in the past year, there were also $64 billion of payments. The level of payments has been steadily increasing in recent years, with an increase of around 50% having been reported in the past 5 years. Some super funds are already cash flow negative, and if, as likely, this trend continues, there will be soon be a majority of super funds in this situation. This has significant implications for both individual funds and the system as a whole.
A careful reading of the statistics certainly provides interesting insights into emerging trends and issues faced by the industry!