Only 50 superannuation funds left by 2026, projects Rice Warner

The number of superannuation funds (excluding small APRA funds) will fall below 200 by 2016, and by 2026 there are only likely to be 50 funds, according to Rice Warner managing director Michael Rice.

The latest Rice Warner projections about the shape of the superannuation industry use Australian Prudential Regulation Authority (APRA) statistics about the number of funds at 30 June 2011 (386) as a base.

However, Rice said the APRA figures tend to lag slightly, since the regulator counts merged funds as separate entities until they are completely wound up.

"A fund isn't wound up until the final accounts are done and the final bills are paid, and that could be 18 months after all the members have gone," Rice said.

As a consequence, while there are currently 65 industry funds according to June 2011 APRA figures, the real number is closer to 50 than 60, he said.

The consolidation in the industry will increase as the superannuation sector continues to mature, Rice added.

Along with a reduction in the number of funds, 2026 will see the amount of superannuation fund assets in the drawdown phase increase to 42 per cent from 30 per cent as at 30 June 2011, according to the report.

Negative cashflows already exist in some defined benefit funds that have a high percentage of retired members - a phenomenon that will only increase as baby boomers leave the workforce, Rice said.

"Funds will start moving from an era where they grow assets by 10 per cent per annum just through the sheer amount of superannuation guarantee," Rice said.

The percentage of self-managed super funds will decrease slightly as big funds continue to offer products that mirror the functions of DIY funds, he added.

Employer master trusts will benefit from MySuper, with their market share rising from 7.5 per cent at 30 June 2011 to 13.9 per cent in 2026, according to the report.

The banning of commissions will also mean that retail super will be able to compete with industry funds on fees, Rice said.