APRA has insights into Super

APRA’s insights are set out in its new publication – appropriately named “Insights” and even more appropriately the inaugural issue is numbered “Issue No 1”.

In short, the insights into the superannuation industry in respect of 2012/13 can be summarised as -

• Structural change is arising from transition of assets from accumulation to pension phase, consolidation of industry funds and the migration of large balances from APRA funds to SMSFs.
• The value of superannuation assets increased by 15.7% to be $1.6 trillion at year’s end – which is roughly equivalent to 106% of Australia’s GDP  (the last time total super assets exceeded GDP was in 2006/07 just before the GFC).
• The growth in the value of super assets was driven by significant net contribution inflows and strong investment returns – which by 31 December 2013 – increased super assets to $1.8 trillion.
• While growth in SMSF assets slowed during the year – they still comprised the largest segment – comprising 31% of total super assets, retail sector comprising 26% of super assets, industry fund sector compromising 21% of super assets, public sector with 16% and, finally, the corporate sector with 4%.
• In relation to the APRA regulated segment of the superannuation industry, the trend for direct investment – as against collective investments, has increased with 45.9% of assets invested directly, 40.3% invested via fund managers and 13.9% invested in life office statutory funds.
• Consolidation in the APRA regulated segment of the superannuation industry continues with RSE licensees reduced from 209 to 190 as at 30 June 2013 and further reducing to 179 as at 31 December 2013.  The decline in RSE licensees (ie those companies and individuals licensed by APRA to act as trustees of APRA regulated funds) matched the decline in the number of APRA regulated funds from 333 to 305 (as at 30 June 2013) with a further decline to 290 funds as at 31 December 2013.
• The largest decline in APRA funds was in the “corporate” sector as employers transfer their employer sponsored funds to other entities.
• Over the period from 2004 to 2013 the total number of APRA regulated funds declined from 1,800 to 290 (these numbers do not include APRA regulated funds with less than 5 members).
• As at 30 June 2013 the largest 20 funds (measured by assets) consisted of 10 retail funds, 6 industry funds, 3 public sector and 1 corporate fund (being Telstra).  The top 20 funds constituted 58% of total superannuation assets and 54.5% of members of APRA regulated funds.
• The significance of industry funds is shown by the fact that the largest fund is now an industry fund (Australian Super), industry funds constitute 29% of the assets of the top 20 funds and they increased in asset value at a greater rate than the retail funds – the greatest increase being 38% in asset value for an industry fund and 25% for the retail sector.
• Gross contributions slightly declined during the financial year to $115 billion which is roughly equal to 7% of Australia’s GDP.
• Benefit payments increased by 4.7% over the year to $74.5 billion with the largest outflow experienced by retail funds and public sector funds.  Also the proportion of benefits taken as pensions continued to increase.
• Net rollovers from APRA regulated funds have mostly been negative since 2008 – which reflect continued flow of assets from the APRA regulated sector to the SMSF sector.
• Members aged, in the pre-retirement segment of 50 to 59, hold about 30% of the assets which suggests that over the next 5 to 10 years, a significant number of members will be requiring retirement stream products.