Choice hurts corporates

22 February 2006

| By Mike |

Corporate superannuation funds have emerged as the initial major losers from Australia’s new choice of superannuation fund regime, according to the latest figures released by the Australian Prudential Regulation Authority (APRA).

The September quarter figures, released in mid-January, are regarded as providing one of the clearest pictures of the impact of the new choice of fund regime, and the adverse picture for corporate funds was made clear in the data dealing with net rollovers and net contributions.

According to the APRA data, retail funds received $1.3 billion in net rollovers and industry funds received $0.9 billion, while corporate and public sector funds recorded negative net rollovers of $1.8 billion and $193 million respectively.

Interestingly, industry funds appear to be the fastest-growing sector with assets increasing by 8.8 per cent, compared to an increase in retail fund assets of 6.4 per cent, and public sector fund assets of 5.9 per cent. Corporate fund assets increased by 4.9 per cent.

But despite industry funds leading the way in terms of asset growth, retail funds remain the dominant force in the superannuation sector, accounting for 33.3 per cent of total assets, followed by self managed superannuation funds with 22.7 per cent, and public sector funds with 17.2 per cent.

In comparison, industry funds accounted for 15.5 per cent of total assets while corporate funds accounted for just 8.7 per cent.

APRA said that net contributions (contributions plus net rollovers, less benefit payments) totalled $6.6 billion in the September quarter, with industry, public sector and retail funds all recording positive net contributions. However, it said that corporate funds recorded negative contributions, “primarily due to large outward rollovers from the sector”.

According to the APRA data, total estimated superannuation assets increased by 6.7 per cent in the September quarter to $791.5 billion — a 22.4 per cent increase over the previous corresponding period.

When it came to performance during the September quarter corporate funds led the way, generating a return on assets of 5.9 per cent, compared to 5.7 per cent for public sector funds, 5.3 per cent for industry funds, and 5 per cent for retail funds.

The APRA data said that at the end of the September quarter, 24.9 per cent of superannuation assets were invested in wholesale trusts, 24.2 per cent in life insurance companies, and 21.3 per cent in individually managed mandates.

It said corporate and industry funds held a greater proportion of their assets in wholesale trusts, while public sector and retail funds held the majority of their assets in individually managed mandates and life office funds respectively.