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Super changes to slow SMSF asset growth

Changes to the cap on concessional contributions and the lifetime cap on non-concessional contributions in the federal budget will slow down the growth rate in assets held in SMSFs and new funds transferred into SMSFs, DEXX&R predicts.

According to DEXX&R's Market Projections Report, the changes will accelerate growth in assets under management in retail and industry funds, while the investment flexibility and cost advantage currently offered by SMSFs will be eroded.

The report projected that annual growth in funds under management/advice (FUM/A) held in SMSFs is expected to fall from 4.1 per cent per annum to 3 per cent per annum as a result of the budget changes.

"With future contributions capped, there is little scope for SMSFs to obtain lower charges than those imposed by retail or industry funds," DEXX&R said in a statement.

"The ability to service investments in other asset classes, for example buying units in a geared real estate trust where the property is controlled by the member, will also be significantly reduced."

The report projected that contribution inflows into SMSFs are expected to fall by $4 billion in the 12 months from 1 July 2017, slowing the growth rate in FUM/A held in the accumulation phase.

"SMSFs with the capacity to make higher contributions may direct some of this excess to their partner's or spouse's accumulation account or outside super into tax advantaged insurance bonds or wrap accounts and master funds or other investments," the statement said.