Nervous members of self managed superannuation funds (SMSF) have significantly cut back on contributions since the federal government announced major changes in the May budget.
The average contribution fell 38% in June quarter to $10,748 compared to $17,320 in the same three months the year before.
This was the lowest June quarter contribution in four years, according analysis in the latest SuperConcepts SMSF Investment Patterns Survey by AMP.
The final quarter of the financial year is usually the highest as fund trustees add in cash to make up contribution levels allowed for a full year.
“It’s the lowest June quarter result since 2012 and reflects the nervousness of clients over speculation on changes to the superannuation rules culminating with the federal budget announcements,” says Phil La Greca, executive manager at SuperConcepts.
The government changes to superannuation include cutting annual pre-tax contribution limits to $25,000 a year from $35,000, setting a for-life limit of after tax contributions at $500,000 and limiting the tax free component during the pension phase at $1.6 million.
“The June quarter, which is normally the highest quarter of any year, was still the highest for this year but it was the lowest amount that we’ve ever seen for a June quarter,” says La Greca.
“Obviously the uncertainty of these measure (the budget) have had a major impact. People were holding back making contributions.”
Overall, the analysis of SMSF investment trends across the 2016 financial year shows investments in Australian shares fell to 34.5% from 37.1% of portfolios.
Holdings in international shares to fell to 13.1% from 14.1%.
Cash holdings increased to 18% from 17% despite interest rates continuing to decline.
Property, both direct and listed, continued to prove a popular investment for SMSF trustees, increasing to 21.7% from 18.3%.
“We’ve seen a large number of SMSF trustees diversify away from international and domestic equities,” says La Greca.
“At the same time, there’s been an increasing number of investors moving into property and cash, suggesting they are looking to reduce their exposure to the stock market, which experienced periods of higher volatility during the period.”
Funds are now paying out more than they are receiving in contributions.
“We have people drawing more for pensions than other people are putting in,” says La Greca.
About 70% of SMSF members are aged 50 or more.
The survey covers 3300 funds, a sample of the SMSFs SuperConcepts administers. The assets of the funds surveyed represents more than $3.1 billion.
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