Industry super funds have caught up with retail funds in terms of assets, so superannuation is now split one-third industry, retail and SMSF. However more consolidation of larger funds is required, according to KPMG.
“Industry funds have caught up with retail funds over the past decade, and now there is an even split between the two at the top end of Australia’s super system,” said KPMG, with the release of the KPMG Super Insights Dashboard and Report.
“But while large funds are getting larger, there are still too many smaller ones which need to be consolidated.”
The report finds that between 2004 and 2016 the market share of retail super funds fell from 43% to 29%.
“It is now virtually one third retail, one third industry/public sector and one-third SMSF.”
“Industry funds are no longer the challenger – they are now the incumbents,” said Paul Howes, KPMG Head of Wealth Advisory.
“Judged by both AUM [Assets Under Management] and the number of accounts held by funds they are the equals of the retail funds, whose cash flows are relatively weaker and whose lead in number of members is falling,” he said.
“At a macro level, the sector is effectively reshaping from its traditional divide between retail, industry and corporate funds to a converging grouping based on the level of AUM and complexity of operating model and offerings.”
KPMG says it found that larger funds have captured a bigger percentage of the total net inflows, while retail and SMSFs experience “high payment demands from members”.
Additionally a “significant segment of the market” had zero net flow – low contributions and rollovers offsetting minimal pension and lump sum payments.
“The large funds, in the main, continue to grow,” said Mr Howes. “They are supported by a big member base, strong Superannuation Guarantee (SG) inflows and outflows still racking at the lower end of the range, due to concerns about longevity of funds in retirement.”
KPMG says while the superannuation industry has had success so far, it now needs to switch attention to post-retirement outcomes.
“The industry has done a good job in the first 25 years of compulsory super in the accumulation phase of superannuation – but it has not yet worked out its approach to an environment where more members become income recipient rather than fund contributors,” Howes said.