According to new research done by Klynveld Peat Marwick Goerdeler (KPMG), industry super funds will emerge as the biggest single segment in the superannuation industry by 2020, as reported by The New Daily.
Last year, the industry super funds’ success surpassed those in retail funds, which has historically been the larger sector. The industry fund assets amounted to $629 billion in December 2018 compared to the retail sector’s $589 billion.
KPMG predicts that by the end of 2020, industry super funds may have more assets under management compared to the SMSF sector. The SMSF sector had $726 billion under management in December 2018 and its growth slower than the industry sector.
The industry fund segment increased membership over 2018 with members increasing by 1.39 per cent. This was mainly due to the decline in retail fund members where it declined by 5.2 per cent over the year. In addition, industry fund assets under management (AUM) increased by 16.3 per cent, measured up to the retail fund sector increase of 5.9 per cent.
Performance of the super industry in 2018
In general, the super industry’s performance in 2018 was healthy with the APRA-regulated (Australian Prudential Regulation Authority) segment rising by 10.3 per cent, in spite of the cloud created over the retail industry due to the banking royal commission. The SMSF sector rose by 6.4 per cent.
In addition, KPMG’s research, formed on 2017/18 APRA figures, identified that the APRA-regulated segment finished the year with an AUM of $1.8 trillion, whereas the SMSF segment ended at nearly $750 billion.
All in all, the superannuation sector assets closed at roughly $2.72 trillion, around 39 per cent greater than the market capitalization of the Australian share market.
KPMG head of asset & wealth, Paul Howes, added, “Despite the increased volatility in the market and greater competitive pressures, the superannuation industry continued to deliver strong outcomes for members overall.
“But with the royal commission final report released in the current financial year, it is likely that the trends identified in our review, particularly between the retail and industry fund sectors, will be exacerbated, driving materially different growth rates across these sectors.”
By 2029, KPMG anticipates that the overall superannuation asset pool will hit $5.4 trillion. They also predict that many employers and members will leave the retail industry to transfer their assets to industry super funds after the royal commission.
In addition, they forecast that industry funds will be the biggest sector by 2029 with more than $2 trillion assets. Further, the retail and public sector fund assets may only be able to increase at half the rate of industry funds, reaching $1.2 trillion and $0.9 trillion respectively.
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