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SMSFs see spike in lump sum payments

Jun 8, 2018, 16:26 PM
The latest findings from the SuperConcepts SMSF Investment Patterns Survey revealed a spike in the allocation of lump sum versus pension payments (19 per cent versus 81 per cent) in the first quarter of 2018. This is a reversal of trends from previous quarters which saw on average 10 per cent of payments as lump sums and 90 per cent as pension payments.

Contribution levels declined during the March 2018 quarter, with average amounts falling from $3,611 in the December quarter to $3,498 in March 2018. 

Continuing a downward trend seen in the past three quarters, the latest SuperConcepts SMSF Investment Patterns Survey highlights the ongoing impact of the 1 July 2017 super reforms. Under the new super rules, 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.

Commenting on the findings, SuperConcepts Executive Manager Technical & Strategic Solutions Phil La Greca, said the large increase in lump sum payments was likely a response to the 2017 super reforms.

“Trustees are looking to manage the new $1.6 million pension transfer balance cap requirements by implementing lump sum benefit payments. This is because lump sum payments taken from pension accounts will be recorded as debits on the members transfer balance account.”

The March 2018 quarter also saw a continued rise in popularity of international managed funds, with two investment pooled structures used for accessing international equities, ranking in the top five largest investment holdings. The increase can in part be explained by the fall in price of all the major banks.

Looking ahead to the next quarter Mr La Greca said, “We could see an increase in the level of concessional contributions in the June 2018 quarter as this will be the first year that allows anyone under the age of 65 is able to claim a tax deduction on personal contributions. 

“We also expect that the trend towards higher lump sum payments will continue as individuals drawing more than the statutory minimum pension amount will have reached this level and all additional payments will be treated as lump sums.”

The quarterly SuperConcepts SMSF Investment Patterns Survey covers approximately 2,600 funds, a sample of SMSFs SuperConcepts administers and the investments they held at 31 March.  The assets of the funds surveyed represent approximately $3.1 billion.

Media contact:

Audrey Blackburn

0466 406 997 | media.enquires@superconcepts.com.au