Cost of living hits super contributions

Superannuation fund members may be scaling back their personal contributions in the face of rising cost of living pressures, according to the Australian Prudential Regulation Authority.

While employer contributions reflected the increase in the superannuation guarantee to 11%, member contributions did not keep pace prompting the regulator to suggest the impact of cost of living pressures.

According to APRA’s quarterly performance statistics for the September quarter total superannuation assets declined by 0.1% over the quarter but remained about $3.5 trillion.

The analysis pointed to higher benefit payments and negative investment returns during the quarter having more than offset contribution inflows.

As well, the APRA analysis said that the rate of return for the September quarter declined from 1.9% in the June quarter to -0.5% due to negative returns in equities across many major economies, including Australia.

It said the rate of return for the year ending September 2023 was 8.8% and the five year average annualised rate of return was 4.8%.

The APRA analysis said the contributions for the quarter reached $42.3 billion and in the year to September 2023 rose by 12.5% to $169 billion.

“Employer contributions were $30.9 billion for the quarter and $126.3 billion for the year ending in September 2023, which was 13.7%  higher compared to the year ending in September 2022,” it said.

“This growth was due to the increase in Superannuation Guarantee (SG) rate to 11.0 per cent from 1 July 2023, and strong labour market outcomes. Employment grew by 3.0% over the past year and wages are estimated to have grown by 4% according to the Wage Price Index.”

“Members contributed $11.3 billion in the quarter and $42.7 billion in the year ending in September 2023, which was 9.0% higher compared to the year ending in September 2022. The flow of member contributions in the September 2023 quarter was similar to the flow in the September 2022 quarter. Given the growth in employment and wages, this could suggest that cost of living pressures are leading members to scale back personal contributions to superannuation,” the APRA analysis said.