Australia’s superannuation surpasses $4 trillion, can it keep climbing?

We have become accustomed to the amount held in superannuation accounts rising inexorably upwards.

After all, the super pile just rose to a staggering $4.1 trillion in the September quarter according to the latest Australian Prudential Regulation Authority (APRA) figures.

That is a staggering number which leaves Australia with the fourth largest global pool of retirement assets but is it conceivable that what goes up might one day come down?

Well, maybe, with the major reason super passed the $4 trillion mark being a combination of rising wages, rising employer contributions, rising private contributions and strong investment returns.

Valuations might reverse but inflows remain strong

Some of those factors could reverse – most notably investment returns – but also, potentially, wages and private contributions.

The real secret of super’s massive rise though, is effectively a government mandated rising percentage of payroll which has now lifted to 11.5% and is headed to its “final” goal of 12% in 2025.

With this percentage continuing to increase, it is difficult to see the total amount of super falling anytime soon, even after large swathes of super members move to the decumulation stage.

Looking at the current figures, total superannuation assets increased by 3.7% over the quarter to reach $4.1 trillion as of September 2024.

Contributions rising strongly

Total contributions increased by 13.1% to $191.3 billion in the year ending in September, with employer contributions up by 11.4% over the year to $140.8 billion.

Members put in $50.5 billion of their own money over the year and $14.9 billion in the September quarter, a fall of 21% compared to the June quarter, which largely reflects super members maximising their contribution limits before the end of the financial year.

As noted earlier though, the increase in super funds in drawdown mode is starting to have an impact with benefit payments up by 11.4% to $119.9 billion in the September year.

That came about due to a 20.3% rise in super pension payments to $54.8 billion and a 4.9% rise in super lump sum payments to $65.1 billion.

Obviously at this stage in the maturity of the superannuation system inflows are absolutely swamping outflows so we are a long way from pension payments leaving an appreciable dent in the overall super savings bucket.

However, over time as the Baby Boomers and following generations with even greater balances retire, the payment side will grow to become more significant.

Return of the SMSF

Interestingly, a renaissance in the self-managed super sector also played a big part in cracking the $4 trillion mark, with tax office figures showing the SMSF sector alone rising to $1.02 trillion.

The APRA data showed that SMSF assets grew by an impressive 10.9% in the September quarter.