APRA data confirms super lump sums still a factor
Despite the Government’s push to encourage superannuation fund members into retirement income products, there has been an increase in the number of people taking lump sums, according to the latest data from the Australian Prudential Regulation Authority (APRA).
The APRA superannuation performance statistics covering the March quarter not only confirmed the degree to which superannuation fund inflows are now being offset by the exit of baby boomers they also revealed just how many of those boomers were exiting and taking lump sums.
APRA’s chart covering benefit payments starkly reveals the impact of the former Government’s COVID-19 hardship superannuation early release program between early 2020 and mid-2021 with an upward trend thereafter.
The data showed that while the increase in the Superannuation Guarantee to 11% together with increased wages had driven Australia’s total superannuation assets up by 4.2% to $3.9 trillion, outflows in the form of benefit payments are becoming an increasing factor.
It found that benefit payments increased by 18.1% for the March quarter to $26.1 billion and $112.9 billion for the year with the increase resulting from an 18.4% increase in lump sum payments and a 17.7% increase in pension payments.
“Total benefit payments for the quarter comprised $13.8 billion of lump sum benefit payments and $12.3 billion of pension payments,” it said noting that net contribution flows (contributions plus net benefit transfers, less benefit payments) were $13.9 billion meaning that net contribution flows for the year to March decreased by 3.9% to $59.8 billion.
More broadly, the APRA data identified an 11.3% increase in contributions for the year to $177 billion made up of $133.3 billion in employer contributions and an 8.2% increase in member contributions to $43.7 billion.
Ppl with balances below $50k-$100k probably cash as the pension would be low and many retire with debt. This not the fault of the super system.
TBC rules mean that all withdrawals above min should be commutations, not pension payments. These probably show up as LS payments.
$3m Div 296 has scared some ppl already resulting in withdrawals.
Pension mins 50% discount was just removed.
People react to incentives. Stop messing with system and don’t be surprised when members react to changes in legislation.
Leave super alone.
Thanks to the housing affordability crisis, many more people are retiring with residual home loan debt, which they then pay off with a super lump sum withdrawal, and rely on the Age Pension for income. The super system isn’t working as intended because the housing system is broken.
So many factors play into why lump sums are taken as opposed to pension products, the retirement income strategy has failed to take into account many of these factors and reality only becomes meaningful in 10 to 15 years time when much bigger balances are being accumulated for retirement. Many 60+ plus have smaller balance unlikely to generate any meaningful pension income, super balances under the means test for Aged Pension so why commute it to an income stream, if they have debt they want to pay it off and if they don’t they are more interested in one big holiday or caravan and 4wd to head off before they can no longer….
Wonder if APRA has ever heard of a Cashout and Recontribution?
And multiple Cashout and Reconts over years, especially now no work test up to age 75.
One of the main problems is that retirees are using the age pension as their lifetime income stream funded not by them but the tax payer.
This is obviously unsustainable plus with the age pension you are not living but more existing.