Growth in discretionary super contributions at seven year high

The growth in discretionary superannuation contributions is at a seven year high, according to The Bond Report, released by the Financial Services Council.

“Between September 2013 and September 2014, member contributions to superannuation funds increased from $4.2 billion to $5.9 billion − 38 per cent −which is the fastest growth since June 2007,” said Financial Services Council (FSC) chief economist, James Bond.

“The significant increase in discretionary contributions was most likely driven by two changes in concessional caps from 1 July 2014 which mean an increase in the cap from $25,000 to $30,000 for those under 50 years, and an increase to $35,000 for those over 50 years,” he said.

Between September 2013 and September 2014 superannuation contributions grew by $1.6 billion, or 7.2%. Most of this growth was due to discretionary super contributions, as compulsory superannuation contributions “have remained flat,” according to the FSC analysis.

“This is evidence of the income recession which has resulted from low employment and wages growth. There has effectively been no growth in employer contributions for two years,” said Mr Bond.

Employer contributions still represent most of the contributions to super, despite the growth in discretionary superannuation contributions. Employer super contributions totalled $75.1 billion in the 12 months to September 2014, compared to $21.7 billion of member super contributions over the same period. This represents 6.6% growth in total superannuation contributions compared to September 2013, comprising 17.6% growth in member contributions and a 3.8% increase in employer contributions.

The FSC Bond Report figures are based on APRA data. FSC uses member contributions as the “closest proxy” to discretionary superannuation contributions, and assumes employer contributions are equivalent to compulsory super contributions.

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