Continuing fall-out from $1.6 million cap

The Government’s $1.6 million lifetime cap is continuing to impact retirement incomes fund flows, according to the latest data from specialist research house, Dexx&r.

The research, covering the September quarter, reveal that total funds under management and advice (FUM/A) in the Retirement Incomes segment decreased by 1.9 per cent, $3.6 billion to $184.1 billion at September 2017, down from $187.7 billion at June 2017.

It found that during the September quarter, retirement income cash flows were a negative $3.5 billion, lower than the record negative $7.1 billion decrease in the June 2017 quarter.

“The net outflow reflects the impact of the $1.6 million lifetime cap which came into effect in July 2017,” the Dexx&r analysis said.

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On a year to date basis, the research found that, over the 12 months to September 2017, Retirement Income FUM/A decreased by 0.1 per cent or $150 million, down from $184.3 billion at September 2016 to $184.1 billion at September 2017. 

 It said Allocated Pensions which made up the majority of Retirement Income FUM/A, decreased by 0.7 per cent,  $1.2 billion to $171.6 billion at September 2017, down from $172.8 billion at September 2016.

Dexx&r said that of the top five managers the Commonwealth Bank (CBA) recorded an increase of 0.7 per cent to $43.4 billion, Westpac a 2.6 per cent decrease to $29.7 billion and AMP a 4.5 per cent decrease in FUM/A to $29.5 billion.

It said Immediate Annuity Total Assets, which made up the remainder of the Retirement Income market increased by 9.4 per cent ($1 billion), up from $11.5 billion at September 2016 to $12.5 billion at September 2017.  Challenger Life dominates the annuity market and has benefited from the wider availability of its immediate annuities in Retirement Income divisions of Industry Super Funds and Retail Platforms.