97 per cent of SMSF accounts are converted into pensions

Self-managed super fund (SMSF) members are more likely to convert their super into a pension than retail and industry fund members, according to a Colonial First State index released on Tuesday.

The income stream index for the financial year ending 30 June 2014 found that SMSF members with higher balances were more likely to take a lump sum at retirement.

However, the findings as a whole (including SMSF, retail, industry, corporate, public sector funds) found members taking full lump sums generally had low balances.

This was based on the fact that 25 per cent took partial lump sums and 41 per cent as an account based pension.  

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When broken down in fund types the percentage of assets and accounts converted to pensions had 98 per cent of assets and 97 per cent of accounts in SMSFs, in retail funds 76 per cent of assets and 46 per cent of accounts, and in industry funds 66 per cent of assets and 25 per cent of accounts.  

"The data shows the system is generally working well. The question is not so much about whether Australians use income stream products in retirement but whether they are using the right income streams," chief executive of Rice Warner, Michael Rice, said.

"We estimate that as the superannuation system matures, 96 per cent of all retirement assets will be taken as income streams by 2025."

The data also concluded that 83.3 per cent of retirement assets were taken as income streams suggesting that the Australian 'lump sum culture' reliance is an exaggeration.

The income stream index measured the percentage of retirement assets taken as income streams rather than lump sums and is derived from Rice Warner's dataset.