SMSFs will dominate post-retirement assets for the next two decades, the latest Deloitte study into the Australian superannuation industry has revealed.
The Deloitte report, titled “The Dynamics of the Australian Superannuation System – the next 20 years – 2013-2033”, predicted post-retirement assets managed by SMSFs would reach $800 million by 2032 and go on to exceed that figure in the following year.
The study forecast the SMSF sector to take over from retail super funds as the dominant space for post-retirement assets to be managed as early as 2017.
“Post-retirement is all about SMSFs. They’re the vehicle of choice for all sorts of reasons – there are tax reasons, there are estate reasons, there are psychological reasons about people wanting to control their investments,” Deloitte superannuation partner Wayne Walker said.
“The big issue for institutional funds, and I include industry funds and banks and life offices here, is how can they better compete with the value that SMSFs are seen by people to deliver.
“It’s already happening a little. We’re seeing a number of funds start to introduce capabilities that allow individual fund members to maintain their own portfolio in shares, term deposits and that sort of thing, to buy and sell shares, but there is a lot more that can and will be done.”
The report’s predicted pre-retirement asset landscape was in stark contrast, with the expectation that industry and retail funds would wrest back market segment control from SMSFs in around 10 years.
“In the pre-retirement market we anticipate the popularity of SMSFs continuing to grow in absolute terms, especially amongst those that have large account balances,” Walker said.
“Most of the growth, however, is going to come from the millions of Australians with balances too low to contemplate an SMSF, and for these people the competition is really between the industry funds and the products offered by the retail institutions, and they offer them both to individuals and employers.
“Under current policy settings, the industry funds have an advantage in obtaining default fund status under awards and we believe if that continues it will translate into rapid growth and in about 10 years’ time industry funds being larger than the SMSF market in pre-retirement dollars.”