Rising employer contributions, which currently make up almost 80% of total annual contributions, will continue to underpin the strong long-term growth of superannuation assets.
APRA statistics for the past 10 years show the steady growth of employer contributions and the widening of the considerable gap between employer and personal contributions.
By contrast, non-concessional contributions have remained relatively stable over the past decade, tending to fluctuate following periods of poor investment performance.
Future growth: Concessional contributions
Rice Warner projects that the ratio of superannuation pre-retirement and retirement assets to real gross domestic product will rise from a little over 120% today to almost 180% within 30 years.
This growth is projected despite movement of millions of baby boomers from the accumulation phase to the retirement phase and drawing upon their benefits.
Concessional contributions comprising Superannuation Guarantee (SG), defined- benefit and salary-sacrificed contributions will keep rising because:
- • SG contributions are legislated to progressively increase from 9.5% in 2016-17 to 12% from 2025.
- • The tax-effectiveness of superannuation in the accumulation and pension phases, together with a history of solid investment performance, will continue to attract a strong flow of salary-sacrificed contributions.
- • Fund members will increasingly remain in the workforce past what have been traditional retirement ages and continue to receive SG and salary-sacrificed contributions.
Despite some commentary to the contrary, the federal Government’s superannuation proposals, which include lowering the concessional contributions cap to $25,000 from July 2017, are unlikely to have much of a long-term impact on the total amount of employer contributions. The reality is that only a very small proportion of members currently contribute up to the current higher cap.
