The last decade has shown a migration of market share from retail to industry funds, which has seen a corresponding increase in asset under management (AUM) by industry funds.
From 2004-2016, retail funds declined in market share from 43 per cent to 29 per cent.
The makeup of the superannuation landscape is now essentially an even split between retail, industry/public sector funds, and SMSFs.
“Industry funds are no longer the challenger; they are now the incumbents. Judged by both AUM and the number of accounts held by funds, they are the equals of the retail funds whose cash flows are relatively weaker and whose lead in number of members is falling,” said former union boss and current head of wealth advisory at KPMG, Paul Howes.
“At a macro level, the sector is effectively reshaping from its traditional divide between retail, industry and corporate funds to a converging grouping based on the level of AUM and complexity of operating model and offerings,” Mr Howes said.
Meanwhile, KPMG’s director, wealth management, markets and growth, Manish Prasad told SMSF Adviser that growth in the SMSF sector has steadied compared to previous years, but it is still continuing on an upwards trajectory.
“SMSFs over the last four- or five-year period have incrementally grown their market share, which for such a large market is significant growth, and that growth has now stabilised,” he said.
“There is still underlying growth, it just hasn’t been at the rate that has previously been experienced - where SMSFs came out of basically nowhere to take out a third of the market,” Mr Prasad said.
The growth in the market, large APRA funds in particular, is supported by a big members’ base and strong superannuation guarantee (SG) inflows, KPMG noted. However, longevity and adequacy concerns still remain pertinent.
“It is important to note that the current 9.5 per cent compulsory employer contribution is not set to build sufficient assets to provide the 65 per cent of working income considered adequate for retirement. But our analysis shows that, given the SG increases set to come in over the next eight years, a person on an average earning who starts their career after 2006 and worked for 40 years would retire with a balance of $545,000, a level agreed to be enough for a comfortable standard of living,” Mr Howes said.
He also said that while the industry has “done a good job” getting the accumulation phase stabilised, it’s still struggling with working out the upcoming environment where more members become income recipients rather than fund contributors.
“Funds will have multiple audiences, members will have higher ages and more funds will have outflows that exceed inflows. That is the next challenge,” Mr Howes said.
“We would encourage more funds to consider the idea of appointing a chief retirement income officer with responsibility for delivering retirement income to members, while the chief investment officer is free to concentrate on maximising investment returns.”