As part of a recent paper by the SMSF Association and BT, Rice Warner chief executive Michael Rice said that over the last decade, the SMSF market share has slightly retracted and this was driven by a couple of factors.
Mr Rice said that one of these factors was the impact of the federal budget changes of 2016 which reduced the amount that could be put into superannuation and the attractiveness of the retirement phase, which represents around half of SMSF assets.
He also noted that there has been a plateau in the total number of SMSFs.
“There is still a healthy rate of new SMSFs, but the number of established SMSFs is lower than in previous years and, anecdotally, more funds are being shut down and returning to an APRA-regulated entity,” he said.
The commercial and corporate sectors have also contracted over the past decade, he said.
“For commercial funds, we have projected this to continue, particularly off the back of the Productivity Commission and the royal commission, where heightened media attention has driven billions of dollars from commercial funds to industry funds,” Mr Rice said.
“Corporate funds have diminished quickly, as many companies have outsourced their in-house superannuation trusts to specialist funds in other sectors.”
Rice Warner predicts that this fund consolidation will continue at a rapid pace, although it is likely that a few large corporate funds such as Qantas Super and Telstra Super are likely to back themselves to continue for the foreseeable future.
The consultancy firm predicts that the $750 billion held in SMSFs at 30 June 2018 will grow to $1.47 trillion by 30 June 2028.
In terms of not-for-profit funds, it predicts the assets held in these funds in total will climb from $1.1 trillion up to 2.3 trillion.
It predicts the market share for not-for-profit funds will jump from 43.7 per cent up to 46.9 per cent.
The market share of SMSFs is expected to remain around the same level, dipping slightly from 29.7 per cent to 29.4 per cent.
“Industry funds have been gaining market share for an extended period, generally at the expense of commercial and corporate funds,” he said.
“This looks set to continue, as we project industry funds to overtake SMSFs as the largest segment by 2020.”
Despite these factors, Mr Rice said that Rice Warner projects that SMSFs will continue to hold a healthy 30 per cent of the market in terms of assets, as they continue to provide a strong option to mostly high-wealth individuals approaching retirement.
“It is important to note that another threat to SMSFs is Labor’s announced policy to remove the refundability of franking credits. As this policy is targeted at a fund level, many members may shift back to APRA-regulated funds that offer direct share options as they will be able to retain the franking credit benefit for a modest fee,” he said.
Leading not-for-profit and commercial funds are also responding to leakage to SMSFs by improving their offerings to members, with benefits from scale largely being reinvested into enhanced services, he added.
“Initiatives include introducing new retirement income products, upgrading investment menus, enhancing models for self-directed and guided advice, and using data analytics to target their communications to members are all expected to lead to higher retention at retirement,” he said.
