Future of super a two-horse race

With corporate and retail super funds declining and government super “significantly” underfunded, the future of the super industry appears to lie with SMSFs and industry funds, according to Townsends Business & Corporate Lawyers.

Michael Hallinan, special counsel, superannuation at Townsends told SMSF Adviser that industry funds are becoming more efficient in terms of administration, while self-managed super funds provide greater control and cost efficiency, particularly compared to retail funds, for larger account balances.

However, Mr Hallinan also said that while industry funds will continue to grow at the expense of retail funds, SMSFs will continue to grow at the expense of both.

Industry funds act as a stepping stone to SMSFs, Mr Hallinan said, with members moving on from industry funds once they have a “significant” account balance.

“The future of super does seem to be between industry funds and SMSFs with industry funds acting as incubators for SMSFs,” Mr Hallinan said.

He added that industry funds are experiencing “big outflows” because of SMSFs, and are providing products that have SMSF-like capabilities in response.

“SMSFs are the most significant long-term threat to both retail and industry funds,” Mr Hallinan said.

The Australian Prudential Regulation Authority has estimated that as of 31 March 2013, the total value of superannuation assets is $1.58 trillion. SMSFs are estimated as comprising 31.5 per cent of Australia’s superannuation assets, making them the largest superannuation sector.

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