No wonder funds love compulsory superannuation

New figures from APRA show that net superannuation contributions fell by $2.3 million in the June quarter as Aussies withdrew around $30 billion from their super nest eggs under the federal government’s early release policy.

It was the first quarterly decline in net contributions – which includes both inflows and withdrawals – since compulsory super was introduced nearly three decades ago:

Contributions in the June 2020 quarter were $33.6 billion, which was an increase of 17.0 per cent from the March 2020 quarter ($28.7 billion) but 1.4 per cent less than in the June 2019 quarter.

Personal contributions for the June 2020 quarter ($7.8 billion) were particularly soft, recording the lowest June quarter figure since June 2016. Total contributions for the year ending June 2020 were $120.6 billion.

There were $37.4 billion in total benefit payments in the June 2020 quarter, an increase of 77.7 per cent from the March 2020 quarter ($21.1 billion). The increase reflects a spike in lump sum payments caused by the Early Release Scheme that commenced on 20 April. Lump sum payments totalled $26.8 billion in the quarter while pension payments totalled $10.7 billion (Chart 3).

Quarterly net contribution flows (contributions plus net benefit transfers less benefit payments) to the industry were negative (-$2.3 million) for the first time since compulsory superannuation was introduced (Chart 4). Net contribution flows for the year ending June 2020 were $23.5 billion.

No wonder funds love compulsory superannuation so much and lobby so hard for the superannuation guarantee to be increased.

Few other industries in Australia get to enjoy constant growth by government decree, effectively garnishing a significant proportion of the population’s wages into superannuation accounts. This enables superannuation managers to ‘clip-the-ticket’ on an ever-growing pool of funds under management, earning them fatter fees.

For them, compulsory superannuation represents a veritable ‘river of gold’ that gifts fat pay cheques for minimal additional effort.

Unconventional Economist
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