The impact of superannuation on the Australian economy has been driven home by the release of Australian Prudential Regulation Authority (APRA) data revealing that total superannuation assets increased by 18.5 per cent for the year ending June 30, 2005, to $761.9 billion.
Six months later that figure has risen to pass the $800 billion barrier, but what is important about the APRA data is that it confirms that industry funds have been the initial winners in the immediate choice of fund environment.
The data showed that industry funds experienced the largest growth during the year to June 2005, with assets increasing 27.4 per cent. Small fund assets also experienced strong growth during the 12-month period, with assets increasing 26.3 per cent.
In comparison, the assets of retail funds grew by 16.9 per cent, public sector funds grew by 14.8 per cent and corporate funds grew by 4 per cent.
The modest growth registered by corporate funds was something noted by APRA’s deputy chairman Ross Jones, who said the new figures had shown the accelerated progress of consolidation in the industry, which had in turn resulted in a contraction in the number of service providers engaged by trustees.
“In particular, an increasing proportion of trustees are using fewer custodians, audit firms and investment managers,” he said.
Jones said the decreasing proportion of qualified audit reports might indicate an improvement in the prudential management of members’ benefits.
Jones’ views were based on those elements of the figures that showed in the four years to June, 2005, the number of superannuation entities with more than four members, excluding exempt public sector funds and pooled superannuation trusts, had declined by over 55 per cent to just 1,305.
The data showed that the number of audit firms servicing these entities had decreased 57 per cent over the same period, while the number of entities that received a qualified audit report had dropped from 6.4 per cent to 3.9 per cent over the same period.
While not validated by more recent data, the APRA figures for the 12 months ending in June last year indicated that self-managed superannuation funds continued to be a popular option for many people.
It showed that the number of superannuation entities increased by 6.9 per cent during the year to 311,000, with the increase being largely attributable to the growth of Australian Taxation Office-regulated self-managed funds, which grew by 7.5 per cent during the year, while the number of entities with more than four members decreased by 25.8 per cent.
The APRA figures showed that member accounts grew by 4.3 per cent over the period, with small funds experiencing the strongest growth increase of 7.7 per cent, followed by industry funds with 6.5 per cent and retail funds with 3.9 per cent.
It said the number of member accounts for corporate funds decreased by 8.6 per cent.
Jones attributed the increase in average account balances to a range of factors, including the increase in the level of the superannuation guarantee since 1993 and the investment performance of superannuation assets.
That assessment tended to be confirmed by the broader APRA data, which showed that the return on assets for superannuation entities with more than four members was 11.1 per cent for the 12 months to June, 2005, with public sector funds generating the highest overall return on funds of 13.2 per cent, followed by public sector funds with 12 per cent and corporate funds with 11.3 per cent.
In comparison, retail funds generated a comparatively modest 9.5 per cent for the period.
There were few surprises with respect to the manner in which superannuation funds were being invested in Australia, with 41.8 per cent of assets being placed with investment managers, 34.4 per cent being directly invested and 23.8 per cent in life office statutory funds.
Not surprisingly, the level of assets held in accumulation funds has rapidly overtaken that held in defined benefit arrangements. Accumulation fund arrangements now represent 49.9 per cent of all assets held, with hybrid arrangements accounting for 46.6 per cent of superannuation assets.
