The latest industry survey has found a reverse trend occurring in the first quarter of the year, with a spike in the allocation of lump sum payments versus pension payments as a result of the new super changes.
The SuperConcepts “SMSF Investment Patterns Survey March 2018” revealed lump sum payments jumped to 19 per cent versus pension payments at 81 per cent, compared to previous quarters with lump sums at 10 per cent and pension payments at 90 per cent on average.
Contribution levels also declined during the quarter, with average amounts falling from $3611 in the December quarter to $3498.
The report also highlighted a continuing downward trend seen in past quarters due to the ongoing impact of the 1 July 2017 super reforms.
Under the new super rules, the total value members can hold in existing tax-free pension accounts cannot exceed $1.6 million and new reduced contribution caps apply to member balances.
SuperConcepts technical and strategic solutions executive manager Phil La Greca said the large increase in lump sum payments was likely a response to the super changes.
“Trustees are looking to manage the new $1.6 million pension balance transfer 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 member’s transfer balance account,” La Greca said.
The March quarter also saw a continued rise in popularity for international managed funds.
The report said two investment pooled structures used for accessing international equities ranked in the top five largest investment holdings.
The increase in part can be explained by the fall in the price of all the major banks.
Commenting on expectations for the next survey, La Greca said he believes an increase in the level of concessional contributions in the June 2018 quarter was likely as it is the first year allowing anyone under the age of 65 to be able to claim a tax deduction on personal contributions.
“We also expect that the trend towards higher lump sum payments will continue as individuals drawing more than the statutory minimum person amount will have reached this level and all additional payments will be treated as lump sums,” he said.
The survey covers around 2600 funds, a sample of SMSFs administered by SuperConcepts, and their investments held at 31 March.
The assets of the funds surveyed represent about $3.1 billion.
