Deloitte’s Dynamics of the Australian Superannuation System showed continuing growth despite historically low cash rate and weak inflation.
Total superannuation assets rose from $2 trillion at 30 June 2015 to $2.7 trillion at 30 June 2018.
Deloitte’s modelling predicts that Australia’s total superannuation will increase over the next 10 years to $10.2 trillion by 2038, equating for a rise in compulsory superannuation to 12 per cent by July 2025.
Diane Somerville, author and principal of Deloitte Actuaries and Consultants, said: “In spite of short-term volatility, funds have consistently earned robust returns over the medium term, ensuring average balances at retirement have increased.”
“An important caveat to the projected 275 per cent growth in total superannuation assets to $10.2 trillion is that the current low interest rate environment that has continued to prevail both in Australia and globally for more than five years is likely to remain the ‘new normal’.”
Deloitte Superannuation lead partner Russell Mason noted that currently the total investment by superannuation funds in Australian shares comprises around 35 per cent of the total market capitalisation of the ASX.
“If they retain the same percentage allocation, this will increase to more than 60 per cent by 2038 – almost double the current allocation – and so dominate the ASX’s holdings,” he said.
The report also showed that post-retirement assets are also expected to grow despite members beginning to draw down their accumulated superannuation savings over time.
“However, given that there are no maximum constraints on the pace of members drawing down their benefits in retirement, if retirees are forced to draw down their retirement savings more quickly than expected in a low return environment, the projected asset growth to more than $10 trillion by 2038 would slow,” Mr Mason concluded.
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