Allocated pensions outflows increase by 97%

Allocated pensions outflows increased by 97 per cent to $17.3 billion during the June 2017 quarter, compared to $8.8 billion in the March 2017 quarter, according to DEXX&R.

The research house found that allocated pension net cashflow had now been negative in the past four quarters.

DEXX&R managing director, Mark Kachor, told Money Management that the substantial outflows were a result of the 1 July superannuation changes taking effect, namely the $1.6 million transfer balance cap and the lower contributions caps.

While outflows were expected, such a large outflow number was not and Kachor pointed to the fact that there was no much member information on the retail side in comparison to industry funds.

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“When you look underneath [the outflows], those that cater to higher net worth individuals like Macquarie are the ones with the biggest outflows. What we think is happening is that those with balances higher than $1.6 million have been moving them out and also the lower contribution caps coming from the 1 July changes,” he said.

“There’s also a whole debate on how many accounts that were actually over $1.6 million. Because data on the profiles inside individual retail allocated pension products as pretty scarces, there was also of guess work on what was going to happen.

“Industry super fund, Australian Super said they only found 22 accounts that were over $1.6 million but that would be to be expected as industry funds are not expected to have many high net worth members. On the retail side, there is far less information.”

He noted that it would be interesting to see the next quarter’s results and the level of inflows under the new tax regime.

Total funds under management/administration (FUM/A) in the retirement incomes segment decreased by 2.8 per cent, $5.4 billion to $187.7 billion at June 2017, down from $193.1 billion at March 2017.

However, allocated pensions made up the majority of retirement income FUM/A, increasing 2.8 per cent, $4.8 billion to $175.6 billion at June 2017, up from $170.9 billion at June 2016.

Annuities made up the remainder of the retirement income market with an increase of 5.9 per cent to $12 billion during the June quarter, with Challenger Life dominating the space.

Of the top five allocated pensions managers, Commonwealth Bank (CBA) recorded an increase in FUM of 3.6 per cent to $43.4 billion, Westpac a one per cent decrease to $32 billion, IOOF an increase of 24.3 per cent to $13.7 billion, and AMP a 0.9 per cent increase in to $30.2 billion in the June quarter.

Amongst the five largest retail and wholesale managers, NAB recorded a 9.4 per cent increase in FUM to $166.1 billion, AMP a 5.9 per cent increase to $156.8 billion, CBA a 6.2 per cent increase to $147 billion, Westpac a 9.3 per cent increase to $144.5 billion, and Macquarie a 21.8 per cent increase to $104.7 billion.

DEXX&R found during the June quarter, total retail and wholesale FUM/A increase by 1.7 per cent to $1.208 trillion, up from $1.19 trillion during the March quarter.