Will corporate super funds disappear?

Corporate superannuation will largely disappear and public sector funds will likely decline as the Australian superannuation industry matures over the next 15 years and as more baby boomers move into retirement, according to a new analysis generated by actuarial consultancy Rice Warner.

The analysis, published by senior consultant Alun Stevens, strongly counters suggestions that the retirement of baby boomers will place undue pressure on the superannuation market and create instability as cash flows turn negative.

In fact, the analysis suggests cash flows will remain strong and that while non-investment cash flows will decline, net investment cash flows will remain strong.

"The strong growth and cash flow provide significant capacity for scale growth in the industry," it said.

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However it added that some segments of the market would decline; "for example, corporate funds will largely disappear as they convert into industry funds and master trusts.

The Public Sector will also decline through lower employment and the transition from high contribution defined benefit funds to SG funds".

It said funds in these sectors would need to consider their cash flows and investment strategies carefully, but their specific issues could undoubtedly be absorbed by the market via mergers.

"The larger and more diversified funds will benefit from the general market growth and cash flow and will have capacity to absorb those funds, for instance, whose membership base has aged to the point where significant proportions of their assets need to be realised," the Rice Warner analysis said.