APRA figures: superannuation changes hit contributions

The Australian

22 February 2017

Glenda Korporaal

The superannuation industry continues to be hit by the federal government’s tax and contribution changes with figures out yesterday from the Australian Prudential Regulation Authority showing a 19 per cent plunge in net contributions in the year to the end of December.

A combination of declining new contributions and a continued increase in payouts as the baby-boomer generation retires is cutting into the growth of the super sector. Net contribution flows were down from $38 billion in 2015 to $31bn last year.

Total contributions, which includes compulsory contributions, were down by 0.2 per cent to $103.7bn while total benefit payments rose by 8.2 per cent to $67bn in 2016.

Total personal post-tax contributions, the biggest discretionary sector, were down from $22bn in 2015 to $19.3bn.

While the total assets in the industry grew by 7.4 per cent to a record $2.198 trillion over the year, the increase was largely driven by higher investment returns and compulsory super contributions.

“The strong markets have been holding up the figures,” ClearView chief executive Simon Swanson said yesterday.

“We wouldn’t have seen much increase without the investment returns.”

He said one of the biggest issues facing the industry was Australia’s changing demographics as the population aged and more people took money out of super.

He said the figures showed that people were still reluctant to be making extra one- off contributions to superannuation because of the federal government’s superannuation changes.

“People are now investing a lot more outside of superannuation than they used to because of the changes to the system,” he said.

The increase in total assets in superannuation came after a 6.8 per cent rate of return for super funds (excluding self-managed) for the year to December and a five-year average annual rate of return of 9.2 per cent.

The government announced broad changes to super in the May budget, including plans to cut the caps on concessional contributions to superannuation from $30,000 a year and $35,000 a year for people over 50 to $25,000 a year from July 1.

It also announced a $1.6 million cap on the amount of money that can be moved into a tax-free superannuation account and moves to cut out most of the attractions of transition-to-retirement schemes.

It also announced a $1m cap on post-tax contributions dating back to 2007 applicable on budget night. But complaints over the severity of the proposal saw it drop this measure in November, replacing it with plans to cut the post-tax contribution limit from July 1.

Yesterday’s figures show the self-managed super sector grew by 8.3 per cent to $653.8bn in the year to December, while assets in industry funds increased by more than 12 per cent to $500bn.

But the assets in life office statutory funds were down by 7.9 per cent to $51.3bn.

For many super fund members who have the money, there is now an incentive to put extra into super to take advantage of the contribution caps before the changes come into force on July 1.

“The growth in SMSF assets to $653.8bn is a strong result for the SMSF sector,” the head of policy for the SMSF Association, Jordan George, said yesterday.

“It shows continued growth through a time of regulatory change and volatile markets.”

He said the flat growth in contributions was to be expected as many fund members held off while waiting for government policy to be finalised.