The latest APRA superannuation figures, which show a rare decline in employer contributions, pose some interesting questions as to what’s happening among well-heeled private investors in Australia. James Bond, chief economist at the Financial Services Council, has some possible explanations.
The APRA figures for the March quarter show a 22 per cent increase in voluntary contributions to APRA-regulated funds (not most SMSFs) and their total passed A$1 trillion. However, this masked a 0.2 per cent decline in employer contributions, the second in the last three quarters.
Bond says the decline in employer contributions is concerning because of the significance of compulsory employer contributions to total flows. So, what’s happening? Bond looked behind the figures and spoke with APRA about them.
The employer contributions include the discretionary flows which go through company HR departments. The odd thing was that the downturn occurred only in retail funds, which are the funds most likely to have high-income-earning members.
We know there was no major downturn in employment during the quarter, nor a downturn in average wages. It is highly unlikely, from all other data, that companies suddenly decided to get tardy on paying their super commitments for whatever reason or engaged in a group fraud effort.
Bond says it’s probably one of two things, or a combination of both:
- high-income earners are increasingly moving out of APRA-regulated (large) funds and into SMSFs. We know they continue to do so but this may indicate an acceleration of the trend.
- the markets have been going up but the Government is proposing a reduction in the tax incentives for super. There is also increased uncertainty ahead of the September Federal election. High-income earners may have decided to sit this one out for a while.