Record superannuation contributions in 2021-22

Published on
April 26, 2023
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Record superannuation contributions in 2021-22

Despite the tumultuous capital markets, the Australian superannuation market is in its most robust shape ever, with Australians contributing a record $163 billion into their superannuation accounts in 2021-22.

Contributions increased by 13%, the third highest annual lift since the 2007-08 Global Financial Crisis, according to research from Rainmaker Information.

“The driving force behind this renaissance in contributions was a 9% increase in employer contributions and a staggering 23% increase in member contributions,” said Alex Dunnin, executive director of research and compliance at Rainmaker Information.

Two-thirds of total contributions are paid through employers, with compulsory superannuation guarantee (SG) contributions accounting for slightly less than 60% of all contributions paid.

More startling is that Australians paid on average 17.4% of their total wages and salaries into superannuation in 2021-22. While most people pay only the compulsory 10% rate (as at 30 June 2022), across the economy people on average pay much more.

This, however, raises equity issues, casting a light on how generous the superannuation taxation concessions should be for people on high incomes.

Superannuation net flows, 1996-2022

While this ratio is up from 15.8% in 2018, it is still down on the 20.8% ratio it reached in 2017 before the introduction of Transfer Balance Cap (TBC) that limited tax-free retirement savings to $1.6 million.

The TBC's impact was so profound that if it had not been introduced, Rainmaker Information estimates total superannuation contributions would be equivalent to 23% of all wages by 2022. This would equate to $212 billion or 30% more than the actual aggregate amount in 21-22.

"Contributions into superannuation were so strong through the past decade that each year they exceeded the amount paid as benefits by an average of 30%,” said Dunnin.

“However, the contributions above-SG rate has fallen one-third since 2009 to be 7% by 2022.”

The share of total superannuation benefit payments paid as lump sums, which had been consistently reducing up until 10 years ago, has now reversed course so strongly that it appears to be the new normal.

In 2015-16, the share of benefits paid as pensions peaked at 62%, but by 20-21, it had collapsed to just 44%, although in 21-22 it climbed back to 50%.

Total superannuation contributions 1996 - 2022

Dunnin added: “Another major strategic shift is that the increasing rate of SG contributions, on its way to 12%, has been accompanied by the squeezing down of the rate of voluntary member contributions.”

These results affirm that while Australia’s superannuation market remains strong and continues to provide a stable platform for retirement savings, it is nevertheless undergoing profound disruption.

This disruption will force super funds to sharpen their offerings, become more efficient and improve their businesses. The big winners from this will be super fund members.

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