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SMSF cash balances fall as trustees turn to equities
Super and retirement
26 February 2018
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Cash balances decreased significantly during the last quarter of 2017 as trustees invested their cash holdings into the Australian and international equity sector, the latest SuperConcepts SMSF Investment Patterns Survey shows.

In the December 2017 quarter cash levels fell to a two year low from a peak of 19.8 per cent in June 2017 to 17.3 per cent in December, signalling a return to ‘normality’ following the introduction of the new super contribution rules.

SuperConcepts Executive Manager Technical & Strategic Solutions Phil La Greca, said SMSFs saw large spikes in contributions in the first half of the year as trustees sought to make the most of the existing higher contribution cap allowances before the July 1 changes.

“Equities were the big winner from the cash injection in the first half of the year as trustees chasing higher returns decided to invest in the last quarter.”

From 1 July 2017, the total value members can hold in existing tax-free pension accounts cannot exceed $1.6 million and new reduced contribution caps apply to member balances.

Mr La Greca said, “Equities were the big winner from the cash injection in the first half of the year as trustees chasing higher returns decided to invest in the last quarter.”

The allocation to Australian equities increased from 35.4 per cent to 36.9 per cent in Q4 and from 13.9 per cent to 14.2 per cent in international equities.

“Managed funds were increasingly used as a vehicle to invest in both domestic and international equities, as trustees look for new growth opportunities

“Investors who are time poor or lack confidence often turn towards specialised managed funds to help them pick a portfolio of small cap stocks or navigate the complexity of investing overseas.”

Managed funds now represent 19.6 per cent of total SMSF assets.

Contribution levels stabilised in terms of the long term relative patterns that existed prior to the announcement of the super reforms in 2016. The average contribution level for the quarter decreased from $3,838 to $3,611 per quarter in line with the expectations following the introduction of the new reduced non-concessional and concessional caps that apply since 1 July.

Looking ahead to the next quarter Mr la Greca said, “It will be interesting to see whether we see a spike in lump sum benefit payments as trustees implement lump sum withdrawal strategies to help stay under the $1.6 million pension transfer balance cap.”

The quarterly SuperConcepts SMSF Investment Patterns Survey covers approximately 2,670 funds, a sample of SMSFs SuperConcepts administers and the investments they held at 31 December 2017.  The assets of the funds surveyed represent approximately $3.2 billion.

Full report is available here.

 

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Audrey Blackburn
+61 (0) 466 406 997
Audrey_Blackburn@amp.com.au