DEXX&R projects 10-year growth in financial services market
The total financial services market is projected to grow at an average annual growth rate of 8.7 per cent per annum over the next 10 years, according to DEXX&R research.
The DEXX&R Market Projections Report revealed that the market is set to grow to $2.771 billion at June 2019.
Considering the key market segments over the next 10 years, the research projected that the total superannuation market sector would increase by an average annual growth rate of 9.1 per cent to $2,501 billion, the retirement incomes market by 11.4 per cent per annum to $275 billion, and the in-force business in the risk market by 14.25 per cent per annum to $49.2 billion.
The research stated that a partial recovery in funds under management and/or administration (FUM/A) in each superannuation market segment was due to an increase in equity values since March 2009 combined with continued inflow of Superannuation Guarantee contributions. It found that going forward, the strongest growth would be seen in the employer super, industry funds and personal super segments. Towards the end of the 10-year period the superannuation market is expected to benefit from both the phased increase in normal retirement age and a projected increase in workforce participation rates for persons over 55.
The growth in the retirement incomes market will be driven by an increase in the number of persons entering retirement over the 10-year period and the availability of a wider range of conservative investment options. The research will be updated following the current review of the Australian superannuation system, which may have a substantial impact on the administration and composition of superannuation system.
The in-force business in the risk market is expected to grow from $13 billion to $49.2 billion in June 2019, primarily driven by an increase in premiums flowing from risk benefits held within the superannuation funds. DEXX&R stated that sales of risk products are currently benefiting from renewed interest from advisers and this trend is expected to continue for at least the next two years, and improvements in default cover provided to members of industry and retail superannuation funds has contributed to strong recent growth, a trend that will also continue over the short term. However, over the medium term the growth rate in in-force group premiums will slow due to lower premium rates offered by insurers and reinsurers when large schemes are retendered.
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