Covid-19 knocks industry funds off superannuation pedestal

KPMG has released its latest Super Insights report, which claims the COVID-19 pandemic has disrupted industry funds’ growth trajectory such that they are no longer on track to overtake SMSFs to become the biggest superannuation sub-sector.

According to KPMG head of asset and wealth management, Linda Elkins:

“The arrival of the COVID-19 era has thrown everything into the air in the super sector”…

“For example, at the end of the 2019 financial year, we believed industry funds would overtake SMSFs as the biggest grouping, just as they had moved ahead of retail funds in the first three years of this study.

“But given the particular challenges now facing the industry funds – in particular resulting from allocations to illiquid assets and the expected increase in benefit payments under the early release scheme – we now predict that SMSFs will again move significantly ahead of the other sectors.”

KPMG’s analysis makes sense.

Industry funds screamed loudest when the Morrison Government first announced its early release of superannuation policy. They also copped a lot of bad press for being too exposed to illiquid unlisted assets, and were caught exaggerating the impact of the Government’s early release policy on retirement balances.

Industry funds have also experienced by far the largest superannuation withdrawals, and their younger member base has been hardest hit by job losses, meaning that their share of total superannuation funds under management will shrink relative to the other sub-sectors.

Unconventional Economist
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Comments

  1. Since the Fed has guaranteed equities only go up the industry funds just have to sell up and nick off to Wall Street

  2. Didn’t realise the SMSF section was so big, even more reason that property can’t go down, that would be their underlying investment wouldn’t it?

    • innocent bystanderMEMBER

      nope. last time I looked it was about 3% or 4% of total assets
      that is not say some SMSFs only have an IP as an asset

  3. Not entirely convinced about about the logic here – SMSFs are probably as large as they are going to get because the bigger SMSF beneficiaries are now approaching or in retirement and are taking money out of the system and given changes over recent years, it is harder to get enough money into super to justify the expense and complexity of an SMSF in the first place.

    • innocent bystanderMEMBER

      yes, that makes sense
      alto, there is the downsizing option. sell PPOR and you can put $300k in, times 2 for a couple.