Date posted: 4/04/2018 5 min read

Net growth in super sector continues to decline

Later last week APRA released its annual super statistics.

In brief

  • APRA stats show total super contributions last year increased by over 8%
  • But benefits paid continue to increase faster
  • Fund expenses have increased faster than other items

Later last week APRA released its annual super statistics.

There is $2.5 trillion in the super industry.

A huge number by any measure.  Australia’s GDP is about $1.7 trillion.

Because it’s such a large number there is a tendency to concentrate on these big numbers and everyone celebrates that the sector continues to grow – last year by over 18%.

As we all know the super industry is quite simple – money goes into a fund via contributions and transfers and then money goes out via expenses, taxes and benefit payments/transfers.

If we ignore the changes in market value of assets is the super sector continuing to grow?  That is, is the total super industry, and each segment of the sector, continuing to increase after looking at money in and money out?

The short answer is yes but that rate of increase has been declining for some time.

Only 8 cents in every new dollar retained

In the 2016/17 financial year the whole super industry took in $148 billion in contributions.  It managed to retain only 8 cents – that is $11.4 billion.

In the 2016/17 financial year, member contributions increased by some 18% on the previous year presumably because some individuals made larger contributions before the lower non-concessional cap was reduced from 1 July 2017 onwards.

Employer contributions were only 3% higher year on year – roughly explained by wage increases and more people in employment.

Percentage net increase in contributions

Benefit payments continue to increase strongly

In the year to June 2017, super funds paid out $112 billion in benefit payments.  An increase of 10.6% on the previous year.

But expenses increase at a very fast rate

In the same period fund expenses – both administration and investment expenses – increased by over 14% to $17.6 billion.

Are some sectors doing better than others?

Yes.

The corporate sector continues to decline rapidly.  For every dollar of contributions received, this sector lost 50 cents in benefit payments, transfers, expenses and taxes.

The retail sector lost $1.08 for every new contribution dollar it received and the SMSF sector lost $1.24 for each new contribution dollar.

The best performer was the industry fund sector.  It kept over 50 cents of every new dollar of contribution they received.

Last but not least, the public sector was about square in terms of money in and money out.

Percentage net increase in contributions

Expect even slower growth next year?

Given member contributions were significantly higher this year compared to the 2015/16 year because of the changed regulatory environment we can reasonably expect that next year the rate of net growth in the sector will continue to decline even further.

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