Contribution cap reforms see SMSFs spend cash

Self-managed superannuation fund cash balances fell to a two year low in the December 2017 quarter as trustees allocated more to Australian and international equities.

Latest insights from SuperConcepts show cash levels dropped to 17.3% in December from a peak of 19.8% six months earlier.

SuperConcepts said this signals a return to normality following the introduction of reforms to super contributions, which saw SMSF members making more contributions in the first half of 2017 to take advantage of the higher contribution caps prior to the 1 July changes.

SuperConcepts executive manager, technical and strategic solutions, Phil La Greca said equities benefitted most from that cash injection with trustees seeking higher returns in the last quarter.

Over that period, the allocation to Australian equities increased from 35.4% to 36.9%. Meanwhile, international equities allocations rose from 13.9% to 14.2%.

"Managed funds were increasingly used as a vehicle to invest in both domestic and international equities, as trustees look for new growth opportunities," La Greca said.

He said this is because investors who are time poor or lack confidence often turn to specialised managed funds to assist them in picking a portfolio of small cap stocks or navigate the complexity of investing overseas. As such, managed funds now account for 19.6% of total SMSF assets.

Further, contribution levels stabilised in terms of the long-term relative patterns seen before announcement of the super reforms in 2016.

The average contribution level for the quarter decreased from $3838 to $3611, reflecting the introduction of the reduced caps.

Looking forward, 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 survey looks at about 2670 funds, a sample of SMSFs SuperConcepts administers and the investments they held at 31 December 2017, and represent about $3.2 billion in assets.

Read more: SuperConceptsSMSFself-managed superannuationsuperannuationPhil La Greca
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