Reduced super contribution caps for people over 50 has led to 25% fall in SMSF contributions

Reduced super contributions caps for people over 50 have resulted in self-managed superannuation fund contributions falling by almost 25% in the 2012-13 financial year, according to new research.

In the past year, average contributions fell $12,300 from $47,500 to $35,200, a study by SMSF fund administrator Multiport found.

The report found the decline was most likely the result of the reduction in the concessional contribution cap, with a cap of $25,000 applying to members of all ages during the 2013 financial year, rather than just those under 50.

In the past three financial years SMSF holders over 60 years old could make a concessional contribution of $50,000 to their fund.

In the 2013-14 financial year the cap will be increased and people over 60 will be able to contribute $35,000.

“With the increase in Super Guarantee to 9.25% and the increased concessional cap of $35,000 applying to the over 60s from July 1, 2013, a small lift is expected in the contribution levels for the 2014 financial year,” the Multiport report states.

But SMSF Professionals Association of Australia chief executive Andrea Slattery said it’s not just the changes in concessional caps which are influencing the amount people contribute.

“Our research confirms people have contributed less because they were concerned by the government’s constant tinkering with super and they had less confidence in the super system for the long term.

“People are not confident in the decisions which were being made around super,” she says.

Labor has said it would make no major changes, while the Coalition committed to making no detrimental changes.

Slattery says the freeze will give Australians greater confidence in planning for their futures.

The Multiport survey of 1950 of its clients also found SMSFs are starting to favour higher risk investment options.

“A significant amount of cash holdings moved into the fixed interest sector early in the financial year, with the cash down almost 2.7% and fixed interest up 2.6%,” AMP SMSF administration head of technical services Philip La Greca said in a statement.

La Greca says the changes in these investments were influenced by the reduction in official interest rates and improving sentiment about future movements.

“The allocation to Australian shares was up 0.8% to 37.5%, slightly higher than expected from normal growth in the market. This was mostly driven by the significant weighting that direct Australian shareholders have in the top 20 stocks, which outperformed the All Ordinaries,” he says.

Slattery says SPAA research also indicates more people are investing in property and equity.

“SMSF trustees are professionally advised as well as more engaged, and that engagement means they’re making decisions that are for their benefit in retirement and SMSF trustees do perform quite well,” she says.