Weak inflows for super.

The June 2013 quarter defied the seasonal pattern of strong superannuation contributions at the end of financial year, instead recording one of the weakest quarters for contributions since the global financial crisis, according to the Financial Services Council’s Bond Report, released today.

FSC chief economist, James Bond said: “Superannuation contributions at the end of the financial year have not been as strong as we would usually expect.”

Total contributions for June 2013 were $112 million lower than June 2012. Contributions also fell by $399 million between the March and June quarters in seasonally adjusted terms.

“Weak growth in September 2012 and March 2013 have combined with the decline in this quarter to result in weak growth of 1.9 per cent for the last financial year,” Mr Bond said.

Total contributions in the 2012-13 financial year were $87.5 billion.

The main driver of the weak result was a decline in employer contributions. These fell by $489 million between June 2012 and June 2013.

“The decline in employer contributions in three of the past four quarters has overshadowed an increase in member contributions,” Mr Bond said.

“Rising unemployment and slowing GDP growth could be the reasons why people are holding back salary sacrificed contributions to their superannuation funds.”

“It is also possible that the leakage to self-managed funds is taking higher contributing members from the APRA regulated fund sector,” he said.

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Total contributions in 2011-12 were $85.9 billion up by $5.8 billion or 7.3 per cent on the prior financial year.

Chief economist of the Financial Services Council, James Bond said: “The strong growth in superannuation flows are being driven by good employment numbers with compulsory contributions growing by $6.1 billion or 9.5 per cent in the 2012 financial year.”

In contrast to employer (compulsory) contributions, member (discretionary) superannuation contributions fell by $0.2 billion in 2011-12 to $16 billion.

“Discretionary flows continue to disappoint reflecting a lack of consumer and investor confidence,” Mr Bond said
“Although discretionary flows represent only around 20 per cent of total flows, strong voluntary flows are necessary if Australians are to have enough money saved for their retirement,” Mr Bond said.

Total contributions for the year, as reported by APRA, were $90 billion. However, to ensure accurate year-on-year comparisons the Bond Report has removed a one-off contribution by the NSW Government of $4.6 billion in the June quarter to contribute to its superannuation liability. This effectively doubled contributions to public sector funds in the quarter.

The FSC’s Bond Report into superannuation industry trends is based on APRA’s quarterly data on contribution to all APRA-regulated superannuation funds.

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