Superannuation fund managers are likely to be encouraged by the findings of DEXX&R's latest market projections report, released this week, which predicts strong growth opportunities in the financial services sector.
The report anticipates the superannuation market sector will increase at an average annual growth rate of 9.1 per cent to $3.2 trillion at June 2022.
DEXX&R attributes this to the recovery of funds under management/advice (FUM/A) in the self-managed super fund (SMSF), industry fund and employer-sponsored master trust segments since the global financial crisis (GFC).
Indeed, the report points out that FUM/A in these sectors is, at current levels, higher than at June 2007, prior to the GFC.
Raising the possibility of 2013 as a "watershed year" for the Australian super industry, the report anticipates significant changes relating to the federal government's MySuper reforms, financial advice reforms and changes to compulsory employer superannuation contributions.
It suggests that despite the long-term growth expected, 2013 may be one of the "most challenging years for product administrators since the commencement of compulsory superannuation in Australia".
The uncertainty these changes are likely to bring about - and subsequent investment return impact - will only be bolstered by the "continuing instability in global markets", the report states.
In addition, the report projects that retirement incomes will grow at 10.7 per cent per annum to $323 billion by June 2022, "boosted by a continued increase in the number of retirees over the next 10 years". It also anticipates that allocated pensions will, by that date, represent 99 per cent of total funds under management held in the retirement income sectors.
While the super industry at large received a relatively positive growth projection, the personal super segment did not fare as well. The report explains that this sector has experienced a "lower rate of recovery" from the repercussions of the GFC and that FUM/A in the sector is 21 per cent lower now - at $147.3 billion - than at the 2007 level of $185.7 billion.
"The change in relative FUM/A between these sectors indicates that the personal super segment will be a smaller part of the superannuation market in future years," the report stated. At the same time, the possibility of a recovery in 2013 was raised due to the personal super segment's having a high rate of discretionary contributions, which are "sensitive to market returns and may recover following the positive returns recorded for most asset classes during 2012".
Most of the report's findings are broadly in line with projections made by global professional services firm Deloitte in November 2011. In a report entitled Dynamics of the Australian Superannuation System: the next 20 years 2011-2030, Deloitte suggested there was "every reason to expect continued growth in superannuation assets in the foreseeable future", aided by increases in the superannuation guarantee, population growth and the ageing population.
In a similar projection to that of DEXX&R, the Deloitte report predicted total assets in the Australian superannuation system would reach $3 trillion by 2020, with an additional projection of $6 trillion by 2030.
