KPMG partners Linda Elkins and Melinda Howes say going forward, super funds will need to compete vigorously among each other for members and manage retirement risk.

Australia’s superannuation juggernaut lost a little of its legendary momentum in FY22 with a small reduction in fund assets, finds a new report from KPMG.

In its annual Super Insights review, KPMG said that in the wake of volatile markets the sector recorded, on average, returns just below – 3 per cent in FY22, leading to a billion dollar fall in funds under management from $2.8 trillion in 2021 to $2.799 trillion in 2022.

It was a different picture for the seven biggest funds, noted KPMG, each worth more than $100 billion, which maintained their growth trajectory thanks to a run of mergers in the sector, it said, observing the composition of the funds had changed.

“In 2021, Australian Super was the only industry fund in the top seven – by the end of FY22, there were three industry funds in that top cohort, replacing one public sector fund and one retail fund. These largest seven funds now represent well over half (58 per cent) of the non-SMSF Australian super industry.

“After the mega funds, there are five funds of $60-100 billion, then a significant gap to the next biggest fund at $32 billion. There are seven funds between $20-32 billion and then a long line of smaller funds,” said KPMG.

A changing landscape

APRA’s push for smaller funds to merge, resulting in the rise of mega funds,  is a continuing driver of change in the super landscape. Five more significant mergers took place in the year under review and nine other funds have now made merger or MOU announcements.

“The growth in the super sector was restricted to the largest funds, mostly due to that merger activity. The Australian super sector is becoming more clearly stratified by size of funds,” Linda Elkins, KPMG national sector leader – asset & wealth management said.

Notably, only 14 funds in the industry posted net flows above $300m; the other funds in the industry had low or negative net flows. And even among the seven biggest players FY 2022 results were mixed, KPMG  said.

In terms of net cashflow momentum, it noted, AustralianSuper dwarfed the rest of the industry by adding a huge $25 billion, followed by Australian Retirement Trust (ART) with the next highest net flows. That was the result of the completed merger of two of Australia’s largest superannuation funds – Sun Super and QSuper – that brought together more than two million members, creating the $230 billion ART.

The KPMG report said that after overtaking the SMSF sector in terms of total net assets to become the largest category in 2021, industry funds enjoyed a significant six per cent jump in market share – from 31 per cent to 37 per cent.

But super funds, like any other business, must contend with vigorous rivalry among themselves to recruit and retain members, observed KPMG’s Elkins.

“To attract members and achieve organic growth funds are increasingly investing in digital capability and improving online offerings. We are also seeing a variety of member retention initiatives and funds creating smooth member journeys – often including an advice element – from accumulation phase to retirement,” she said.

Longevity risk

With Australia’s life expectancy at 84 years, unexpected longevity is a real and present risk for would-be retirees, says Melinda Howes, KPMG superannuation partner. “There is now a critical mass of retirees with a common unmet need – dealing with longevity risk and achieving a certain income for life. APRA requires that by the end of June trustees will have undertaken an assessment of their products and strategies.”

“Consideration of longevity insurance solutions is now front of mind for many funds, given members’ desire for secure income. A number of funds have now created chief retirement officer roles, reflecting the market-wide shift in focus to retirement.”


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