SMSF inflows might have peaked: Tria

Wouter Klijn | 13 Feb 2012

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Wouter Klijn is a journalist with InvestorDaily, a Morningstar publication.


Net inflows into self-managed super funds (SMSFs) have peaked and are now declining, according to Tria Partners.

"The numbers suggest that the tide has peaked," Tria Partners managing partner Andrew Baker said.

"SMSF net inflows have been decelerating for some time, both in terms of dollars and as a percentage of average assets," he said.

SMSF net inflows consist of employer contributions, member contributions, transfers in, and benefits out.

Although employer contributions have never been the major engine of SMSF growth, they have fallen sharply from between $10 billion and $11 billion in previous years to $7 billion in 2010.

"This may well be the effect of the halving of the concessional contributions to super from $50,000 to $25,000," Baker said.

Member contributions are roughly twice as important to SMSFs as employer contributions, but they have fallen from $22 billion in 2008 to $15 billion in 2010.

"This is more likely to relate to a lack of investor confidence in general - the same softness can be observed in member contributions in large funds," Baker said.

Benefits outflows are rising fast and climbed 8 per cent in 2010 to $22 billion and have more than doubled since 2006. 

The one area where SMSFs continue to do well is transfers in which, by definition, overwhelmingly come from large collective funds, Baker said.

"In 2010, this was $14 billion, which is the equivalent of a Cbus disappearing into SMSFs every year. This leakage continues to grow, and remains a major unmet challenge for most large collective funds," he said.

However, Baker also points out that the data available on the SMSF sector was far from complete.

"It's an extremely fragmented segment, so it's hard to get a grip on how it looks as a whole, and how it is changing," he said.

It is therefore possible that the declining inflows merely show a pause in the rise of SMSF, rather than a peak, he said.

"I think the numbers are showing that it's slowing down, but at the same time there are regulatory forces that could see [inflows] spike up again," Baker said.

Investment Trends principal Mark Johnston agreed that it is hard to draw definite conclusions from the data.

But according to the firm's research, the rate of SMSF establishments has remained higher than could normally be expected, Johnston said.

"If you look at the statistics on net establishment, that is where it gets distorted by the 2007 figures when you had the Simpler Super changes and people had the opportunity to tip a lot of money into super," he said.

"A lot of extra SMSFs were established in 2007. But if you look at what happened after that, there actually wasn't much of a lull in terms of the rate falling below its long-term average. It actually held up pretty well.

"You would have expected a lull because a number of them would be been pushed forward, and yet the establishment rate held up quite well."

Johnston also points out that very few people who have set up an SMSF actually go back to a retail or industry super fund.

"Nothing in our research has led us to believe that the rise of SMSFs is slowing down," he said.

This report appeared on 2022 Morningstar Australasia Pty Limited

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