Australia’s superannuation sector will suffer a 40 per cent reduction in the number of funds by 2020, an industry report from CoreData has found.
The “Survival of the Fittest” white paper from researcher CoreData also found that by 2017 the total assets in the superannuation sector would be close to a third larger than Australia’s annual gross domestic product.
As the number of funds was falling, the level of assets was growing, to the point where the average fund, excluding self-managed superannuation funds, had grown to $2.6 billion from $300 million in 2004, the paper found.
CoreData head of advice wealth and super Kristen Turnbull said funds were recognising they needed to reposition for growth and remain competitive in order to ensure survival.
“[Funds] have recognised that if they’re going to remain competitive and be able to compete for those really high-value members (post-retirees), then they’re going to have to be a bit more flexible in the products and services that they are offering,” Turnbull told InvestorDaily.
She said greater innovation was needed to give members more flexibility and choice through direct investment options and advice.
“As the industry matures, more and more people will be making an active choice about where they have their super,” she said.
“Brand [focus] and focusing on member engagement is critical to ensure you can increase the satisfaction and loyalty of your members and potentially turn them into advocates.”
Meanwhile, a recent report by Canstar found there was an increasing trend of funds offering term deposits to investors who wanted to minimise share market exposure.
Four out of the 11 public funds it rated now offered clients the option of investing in term deposits, the report said.
“In this uncertain market, term deposits have been an increasingly popular option in self-managed super funds, but we’re now seeing this option being offered more widely across all superannuation funds,” Canstar research manager Chris Groth said.
“Parking cash in super is something you may well do while waiting for the market to show signs of recovery. However, a term deposit has an added benefit as the rate is locked in.”
Groth said although the downside of term deposits was that investors might miss another investing opportunity while their cash was locked in, term deposits inside superannuation had tax advantages.
“The returns are only taxed at 15 per cent compared to bank term deposits which attract marginal tax rates,” he said.
