The research estimates that the SMSF sector has entered a net drawdown phase, with benefit payments in 2012 exceeding inflows for the first time and with the trend likely to continue over the next 10 years.
“Obviously, there have been huge inflows into this market, but we’ve got an older demographic against the member profile,” DEXX&R managing director Mark Kachor said.
“You’ve got people who have deferred their retirement because they saw their asset values go down after the global financial crisis… but now things have recovered, we’ve had 12 months of strong growth… and people feel that they’re in a position where their assets are large enough to retire.
“Now the other thing is that there is anecdotal evidence that once people are getting into the retirement phase... they’re probably going to be paying a fixed fee on a diminishing asset,” Mr Kachor said.
“So, for those reasons, I think we’ll see outflows into the allocated pension market.”
The research found that from July 2012, SMSF benefit payments are projected to increase to $63 billion by December 2015. That is, $20 billion more than contributions, which are estimated to be $40.5 billion at that time.
The report also found that SMSFs also have a typically higher allocation to cash and term deposits than other superannuation vehicles, holding between 25 per cent to 30 per cent in the asset classes.
Mr Kachor said that cash holdings by SMSFs are likely to remain steady in the near term and will continue to fall within this range.
“Even further back than five years ago, SMSF have held a higher component in cash,” Mr Kachor said.
“When you’re in the retirement phase, the last thing you want to do is to have to sell down your equities when it may not be the right time to do so.
“It makes sense for those, particularly in the retirement phase, to have at least the next year’s drawdown sitting in cash and then they can take a measured decision as to when they liquidate other assets.”