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Sustainability of super industry a “concern”: KPMG

Yasmine Masi29 May 2024
Private infrastructure debt Principal Asset Management

A new report from KPMG has affirmed the “impressive” investment returns delivered by the Australian superannuation sector in the year to 30 June 2023, despite concerns of the impact of industry consolidation.

The firm’s annual ‘Super Insights’ report released in collaboration with Chant West said the sector had effectively “reversed the stagnation” it had suffered in the previous 12 months, growing by 7.6 per cent with investment returns growing to 8.62 per cent from -3.09 per cent the year before.

“After 30 years of Super Guarantee and 10 years of the MySuper regime, it is an appropriate time to look at what is being delivered. We believe member outcomes have been strengthened with strong net investment returns and improved fee arrangements,” Linda Elkins, National Sector Leader – Asset & Wealth Management at KPMG, said.

“But the issue that will concern the sector the most is sustainability – the flow of members is going to a limited number of funds and some are in a net cash outflow position. While the merger activity of recent years slowed a little in FY23, we anticipate this picking up again.”

The report found Australian Super and Australian Retirement Trust (ART) have cemented themselves as the largest of the seven “mega-funds” with over $100 billion, with 20 per cent growth also recorded in the group of six funds worth $60 to $100 billion. This has left the 14th-largest fund sitting at $38 billion.

The report said three industry funds, three retail funds and one public sector fund make up the group of seven “mega-funds”, and found that the gap between the worst performing and average performing funds had closed from 4.66 per cent to 3.62 per cent.

“Overall, super gets a great report card but with some ongoing areas of improvement – funds need to keep up member services and retirement solutions but also be on top of cost management and regulatory reform,” Elkins said.

“We welcome the announcement that Superannuation Guarantee will be paid on parental leave payments and hope both Government and industry will continue to focus on gender equity, superannuation for First Nations people and care for vulnerable customers. This will ensure super is super for everyone.”

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