There has been a spike in lump sum withdrawals from SMSFs, and a corresponding fall in pension payments, likely motivated by the Transfer Balance Account rules.
In the past around 90% of SMSF withdrawals have been pension payments and 10% lump sums, according to SuperConcepts. However, for the March 2018 quarter it was 19% lump sums and 81% pension payments, according to the SMSF Investment Patterns Survey March 2018 by SuperConcepts.
In the December 2017 quarter 12% of withdrawals were lump sum and 88% pension payments.
SuperRatings said the spike in lump sums in the March quarter showed the impact of the super reforms.
“Trustees are looking to manage the new $1.6 million pension transfer balance cap requirements by implementing lump sum benefit payments. This is because lump sum payments taken from pension accounts will be recorded as debits on the members transfer balance account,” said SuperConcepts Executive Manager Technical & Strategic Solutions Phil La Greca.
The new rules may have also contributed to a declining trend in contributions. Average contributions continued the “falling pattern” seen in recent months, down from $3,611 in the December 2017 quarter to $3,498 in the March 2018 quarter.
There was a huge spike in contributions in the June 2017 quarter, presumably in response to the changes that commenced 1 July 2017.
“The reduction of contribution levels for the September, December and March quarter clearly show the impact of the 1 July 2017 changes on member contribution patterns,” said SuperConcepts.
Though Mr La Greca said that there could be an increase in the level of concessional contributions in the June 2018 quarter, as a result of the expansion of personally tax-deductible contributions.
“We also expect that the trend towards higher lump sum payments will continue as individuals drawing more than the statutory minimum pension amount will have reached this level and all additional payments will be treated as lump sums,” he said.
The SMSF Investment Patterns Survey March 2018 is based on around 2,600 SMSFs, comprising a sample of the funds administered by SuperConcepts.