MEDIA RELEASE ‘Rice Warner releases updated retirement savings projection scorecard’

Rice Warner’s 2013 Superannuation Market Projections Report

 Australia’s superannuation industry continues to lay claim as custodians to a world-class, growing retirement savings system that has endured a legacy of continual change for over 30 years.

But more change – both positive and challenging – is on its way, according to Rice Warner’s latest Superannuation Market Projections Report.

Michael Rice, Chief Executive Officer, says the overall picture for Australia’s superannuation market is broadly positive, with growth expected to tip the nation’s retirement savings over the $3 trillion mark in the course of the next 15 years.

“We anticipate the total market to grow to $3.353 trillion dollars in the fifteen years to 2028 (measured in 2013 dollar terms),” Mr Rice said.

In other highlights, the superannuation industry continues to experience ongoing fund consolidation as new legislation and market dynamics impact the underlying structure of the industry.

Mr Rice said the introduction of MySuper was a catalyst for further consolidation in the industry during 2013. In historical terms, the number of large APRA-regulated funds has fallen from 4,474 to 325 over the last 15 years. The trend is expected to continue, resulting in less than 200 funds remaining in the next five years.

MySuper and FoFA have led to lower fees for retail funds. Built-in commissions are virtually extinct and the fees have been set to compete against other MySuper products. Many institutions have partially protected their profit margins by shifting to higher levels of indexed investments or by introducing lifecycle products which hold lower-cost assets for most members with high balances.

Retirement growth and innovation

Retirement assets are expected to grow to 39% of total assets by 2028. This is despite Rice Warner’s expectation that wealthier members will retire later. In particular, the assets held in the retirement phase by industry funds will triple over the next five years.

Mr Rice said: “Superannuation funds have only just begun to develop appropriate solutions for retirement. The key will be to provide advice to members approaching retirement and to match products to their personal needs. Many funds will need to redesign retirement products to help members deal with inflation and longevity in retirement. At present, most of the focus is on liquidity for income needs,” he said.

New Coalition Government

Australia’s superannuation industry is bracing for a tough May 2014 federal Budget. The growth in outlays for the Age Pension and the Disability Support pension for older workers effectively eliminates the opportunity to deliver any further concessions for super.

“A good outcome would be the status quo but higher taxes on superannuation cannot be ruled out,” Mr Rice said.