Rice Warner has released early findings to a report outlining the challenges facing Australia’s super sector, with SMSF leakage still representing the single largest loss point for APRA funds.
In a statement released yesterday, Rice Warner said early findings to its inaugural Super Insights report give an indication of the “multi-faceted challenges” facing Australia’s superannuation sector.
Rice Warner said although the rate of growth has slowed, the roll-outs to SMSFs continue to represent the “single largest leakage point” for the superannuation industry.
“Across the industry, with less than 16 per cent of members effecting a rollover within 12 months of joining a new fund, the net outflow remains strong. Over the 2013 financial year, 26 per cent of the value of all roll-outs were to the SMSF sector,” Rice Warner stated.
The firm noted that several funds have launched member direct investment options in an attempt to stem the leakage.
“It is too early to see the effectiveness of this expanded offer but it shows how worried funds are about the SMSF segment,” Rice Warner said.
Those most likely to make the switch to SMSFs are super members aged over 40, the firm said.
This reflects that it is not effective to set up an SMSF without a “reasonable” balance, which younger members mostly do not have, Rice Warner said.
“There is a trend for some young members to set up an SMSF in order to buy residential property,” the firm noted.
“As Rice Warner has stated previously, we can only hope that this shift to leverage – which is contrary to the spirit of the SIS legislation – can be curtailed.
“There are salient lessons to be learned from investor experiences with highly geared property trusts leading into the GFC. Let's hope SMSF investors have heeded the lessons of downside consequences from the past.”
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