Banks to gain market share in fight for superannuation

According to Rice Warner’s latest Superannuation Market Projections Report, the total market is expected to grow to $3.122 trillion dollars in the fifteen years to 2027 (2012 dollars). 

Taking into account the significant amount of superannuation legislation, together with the cap on voluntary contributions, Rice Warner expects cash flows will be different and the flow of funds between sectors will change.

Not only have the banks developed ‘low-cost’ superannuation products to compete directly with not-for-profit funds, Rice Warner predicts that they will aggressively target their customers and move them as Choice members into online funds linked to personal bank accounts.  As a result, personal superannuation will grow more than any other segment over the next 15 years.  Conversely, the wave of tenders following the requirement to be authorised for MySuper has escalated the number of companies closing their funds and corporate funds will disappear over the next 15 years.

Retirement assets will grow to 38.8% of total assets by 2027.  This is despite Rice Warner’s expectation that members will retire later.  Industry funds in particular, will see assets held in the retirement phase more than triple over the next five years.  Michael Rice, Chief Executive Officer, says

“Industry funds will need to move quickly to meet members’ expectations, in terms of both products and services, as they approach and enter retirement.  If they don’t, they will lose members to the banks and the SMSF segment.  The danger for industry funds is that the banks know so much more about their customers and they can use this knowledge to their advantage”.

Mark Blair, Head of Superannuation at Rice Warner, believes all superannuation product providers must turn their mind to their retirement products and services.  Blair says, “The Australian Superannuation system is only just maturing, some 20 years after its commencement.  Unlike the past 20 years, superannuation providers do not have the luxury of time on their side to ‘get it right’.  The retirement of baby-boomers has begun, and Trustees have an obligation to look after these members up to and  throughout retirement – they must develop products and services that meet the needs of individual members, and they must do so sooner rather than later”.