Australia’s biggest retail superannuation funds are paying out billions more dollars in cash than they are bringing in as baby boomers reach retirement age.
Australia’s biggest retail superannuation funds are paying out billions more dollars in cash than they are bringing in as the wave of baby boomers reaching retirement age starts to hit the $3.6 trillion sector.
AMP’s net cash outflow ratio was the highest last financial year of any major super fund at 2.6 per cent, according to KPMG; Insignia followed at 2 per cent, then Colonial First State at 1.8 per cent and Mercer at 1.6 per cent.Chant West general manager Ian Fryer said a shift to negative, or closer to negative, net cash flows would “totally change how funds can invest”.
“Funds should be mindful of their membership profile and what liquidity they need to meet the needs of their members.” About half of retirees are only withdrawing the legislated minimum required amounts from their super accounts while half are taking out larger amounts or lump sums, according to Chant West.Ms Elkins said industry funds were not yet at the point where cash flow was in the red, but they were “definitely focussed on it” as an “emerging problem”.“It’s not a next year issue – but it’s very definitely a wave coming.
Australian Retirement Trust followed with net cash flow of $7.9 billion last financial year, then Hostplus with $6.2 billion .KPMG projected that the system as a whole would still not be recording net cash flows in the negatives until after 2040, however. The exact point it could happen is unclear given the role investment returns, varying super contributions and individuals’ retirement choices played.
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