Deloitte tips Murray reforms to deliver banks bigger slice of super

The big four banks advance on the superannuation sector is set to get a boost from government policy, says Deloitte. Photo: Paul Rovere

Government reforms are set to boost the banks's efforts to gain ground in the battle to win market share in Australia's $2 trillion and growing superannuation sector, with the growth in retail funds already on track to outstrip growth in stalwart industry funds by 2023. 

That was among the findings of a Deloitte report released on Tuesday that forecast the super sector will swell to $9.5 trillion over the next 20 years. 

Deloitte modelling shows that assuming current trends continue retail funds will outpace their non-profit industry fund rivals by 2023. 

Deloitte backed the push to give people an incentive to roll their super into a self-funded pension, or more likely part-pension. Photo: Jessica Shapiro

And pending reforms to the $428 billion default super market, flowing from the financial system inquiry led by former Commonwealth Bank boss David Murray, could speed up the banks' march into the sector. 

"We may be being very conservative in our estimates of the future growth in retail funds if the government gets its way with its planned reforms to superannuation governance and the default fund selection process," Deloitte superannuation consulting partner Ben Facer said. 

In October the government released its formal response to Mr Murray's inquiry vowing to push ahead with legislation forcing all super funds to appoint one third of independent directors, breaking the equal representation model of unions and employers on industry fund boards, and tasked the Productivity Commission with a new review into the Fair Work Australia governed process for employers to select default super funds for their workers. 

Former Commonwealth Bank boss David Murray led the financial system inquiry. Photo: Louise Kennerley

Deloitte backs Murray reforms

Mr Facer threw his support behind the reform agenda. 

"Improved competition among well governed funds will be good for individual members and the system as a whole," he said. 

"It will allow the development of new products, improve services, and bring down costs". 

Mr Facer said policies to promote good governance and competitive pressure in the superannuation industry would become increasingly critical in the coming years with the value total assets in the sector expected to exceed 200 per cent of gross domestic product by 2035. 

Another outcome of the Murray inquiry was a push to require all super funds to develop retirement income accounts that could be offered retiring members as an alternative to lump sum payouts. 

These retirement income pension-based accounts are expected to be invested in a mixture of growth and defensive asset classes, including annuities and other risk management insurance-like products. 

Retail wealth managers, which already have a larger share of the post-retirment market, have a head start in developing these products through the large financial services companies that own them. 

Deloitte backed the push to give people an incentive to roll their super into a self-funded pension, or more likely part-pension. 

"We do need to encourage more people to take an income stream in the draw-down phase, while acknowledging that for individuals with very low balances this may not be appropriate," Mr Facer said. 

Retail funds already dominate top five

He said superannuation managers would have to show innovation in their development of complex financial products such as lifetime annuities, deferred annuities, pooled-risk management tools. 

Retail wealth management and insurance giant AMP is the biggest player in the local superannuation sector, with $95 billion in super funds under management at June 30, according to Chant West research provided to Fairfax Media. 

The nation's biggest industry fund, AustralianSuper, with $91.3 billion, ranked as the second-largest superannuation manager at the close of last financial year with the rest of the top five rounded out by bank-owned managers. 

At June 30, Westpac's BT Financial had $81.6 billion under management, Commonwealth Bank's Colonial First State had $70.1 billion, and National Australia Bank had $78.6 billion managed through its MLC and Plum brands. 

ANZ Bank ranks tenth for its $33.8 billion share of the super market. 

Other retail businesses among the 20 largest super managers are Mercer, IOOF, and Macquarie Group.