SMSF sector may be hitting a peak
The self-managed superannuation fund (SMSF) sector has entered a net drawdown phase, with benefit payments to exceed contributions by $20 billion by December 2015.
That's according to the latest DEXX&R market projections report, which tipped the total superannuation market to increase at an average annual growth rate of 8.1 per cent to $3.17 trillion by December 2022.
For the nine years from December 2003 to December 2012, SMSF assets have increased at an annualised growth rate of 18 per cent to $474.4 billion, DEXX&R stated.
Over the period from July 2012 to December 2015, SMSF benefit payments are projected to increase to $63 billion, with contributions only reaching $40.5 billion.
"The growth in benefit payments is consistent with the older age profile of SMSF members and an increasing number of SMSF members moving into the retirement income drawdown phase," DEXX&R said.
The report added that the double-digit growth rates of total assets in the segment reported over the last 10 years will not be repeated in the coming decade due to the switch to a negative cash flow.
As with other super segments, the report showed that SMSFs are slowly flocking back into the equities market, with the six months to December 2012 results revealing allocation to Australian listed shares increasing from 29.3 per cent to 31.7 per cent of total assets.
According to the report, this is still shy of the 34 per cent allocation to Australian equities recorded at December 2007.
DEXX&R said that it expects cash holdings by SMSFs to continue to fall within the range of 25 per cent and 30 per cent of total assets.
In other findings, DEXX&R projected retirement incomes to grow at 9.6 per cent per annum to $320 billion by December 2022, with 97 per cent of total funds under management (FUM) allocated to pensions and the remaining 3 per cent in annuities. This is due largely to the continued growth in the number of Australians retiring over the coming years.
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