Regulation to cause escalated outflows from employer super funds

Legislative reforms are causing a slowdown in employer superannuation funds, according to research by DEXX&R, with higher outflows expected over the next 10 years. 

The latest DEXX&R Market Projection report found sustained growth in the employer super segment for the last 25 years was coming to an end as a result of a regulatory influx.  

These included the Your Future, Your Super measures, regulatory recommendations for smaller super funds to merge, downward pressure on administration fees compared to industry funds and the costs of migration of legacy funds onto platform.  

“Recent legislative reforms will be a major force in convincing employers that the few remaining benefits of offering staff their own super fund no longer outweigh the increased trustee obligations and risk of fund closure to new members. 

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“Funds under management/administration (FUM/A) held in the employer sponsored sector is now projected to fall over the next 10 years. 

“Higher outflows will be the result of both successor fund transfers and members, and in particular members in legacy employer super products exercising choice of fund.” 

Around 60% of these outflows would go into industry funds and 40% would be transferred to the incumbent’s administrator personal super facility.  

Employer-sponsored master trust segment FUM/A was projected to decrease at an average rate of 1.1% per annum to $138.4 billion at the end of June 2031. This would be down from $155 billion in June 2021. 

Net cash flows were expected to be negative $4.9 billion by June 2031, DEXX&R said. 

Source: DEXX&R