James Kirby: Superannuation contributions nosedive, says APRA

Industry funds may have extended their golden run, but contributions across the entire sector plunged 16.7 per cent.

A glass jar full of Australian money, retirement, generic

Industry funds may have extended their golden run in the latest batch of super statistics for the three months ending June 30, but contributions across the entire sector plunged 16.7 per cent.

The nosedive in contributions to super over the quarter followed the arrival on July 1 last year of new rules introduced by then Treasurer Scott Morrison, which slashed the maximum amount that can be contributed to super per individual.

The new caps (pre-tax at $25,000 per annum and post tax at $100,000) greatly reduce the ability of savers to put money into super.

For the full 12 months to June 30, 2018 total contributions fell by 6.5 per cent — the massive quarterly drop is explained by a last minute rush as savers pushed money into super before June 30 2017.

Against this backdrop — and fresh from a relatively trouble free run in the royal commission — non-profit industry funds managed a 9.8 per cent return for the year against 7.4 per cent at for-profit retail funds.

Indeed industry funds would have underpinned the strong general performance of all funds for the year at 7.6 per cent — well ahead of long run average performance of super of 5.8 per cent.

However, questions continue to be raised about the nature of asset allocation at industry funds and the extent to which the funds are boosted by unlisted assets which are often less defensive than traditional allocations.

The latest quarterly statistics issued by the regulator Australian Prudential Regulation Authority show that in general super funds have “defensive assets” on average of 31.5 per cent representing fixed income of 21.2 per cent and cash of 10.3 per cent.

In contrast, top performing industry super funds have much less in these traditional defensive categories. For example, AustralianSuper, the largest of the industry funds, has about 19 per cent classic defensive assets in its balanced fund: 11 per cent in fixed income and 8 per cent in cash.

In a win for broader superannuation policy, the new statistics also make it clear that the performance of the MySuper sector is evolving in a useful fashion with total assets powering ahead at around twice system growth.

APRA offered a limited window into individual fund performance limiting its fund-by-fund details to MySuper products.

Again in this low-cost category it is clear industry funds have the upper hand. For example, AustralianSuper managed 4.4 per cent over the period while key retail rival AMP managed 3.74 per cent.

Separately, APRA will have irritated many self managed super fund members with another series of stats that suggest the SMSF sector is not faring as well as institutional funds.

Working on figures supplied by the Australian Tax Office, APRA reported total assets at SMSFs only grew 6.4 per cent — a figure below the entire system growth of 7.9 per cent.

The figures suggest SMSF asset growth, and performance, would have been depressed by the high levels of cash allocations held by some older members in pension mode.

However, concern the SMSF sector would fade due to the clampdown on tax concessions — and the strong investment numbers offered by industry funds — appear unfounded, with SMSF fund numbers rising from 581,000 a year ago to 596,000 on June 30.