2010 retirement incomes market forecast
The following information is the key findings of the DEXX&R Market Share Analysis Report, June 2010, and the DEXX&R Market Projections Report, December 2009. The data shows the trends being set in the retirement incomes market.
Funds under management/administration (FUM/A) in retirement incomes market increased by 11 per cent to $104 billion at June 2010, up from $94 billion at June 2009.
In the three months to June 2010, however, the retirement incomes segment recorded a net decrease of 3.3 per cent in FUM/A, down from $107.9 billion, which was due to a 3.6 per cent fall in FUM/A held in allocated pensions.
While the global financial crisis had a smaller impact on retirement incomes FUM/A in 2008 and 2009, the retirement incomes market has experienced lower rates of growth in FUM/A during FY2010 than other retail market segments.
All Top 10 companies experienced falls in allocated pension FUM/A over the year to June 2010 (see table 1).
Total FUM/A in the retail and wholesale markets increased by 8.7 per cent from $721 billion at June 2009 to $783 billion in the 12 months to June 2010.
Total funds decreased by 3.86 per cent during the June 10 quarter, down from $815 billion as at March 2010 (see table 2).
The total retail market increased by 7.31 per cent over the year to June 2010, up from $458 billion at June 2009 to $492 billion at June 10. Total retail FUM/A decreased by 4.89 per cent during the June 2010 quarter, down from $517 billion as at March 2010 (See table 2).
Market projections: allocated pensions
The allocated pension market has proved to be more resilient to downturns in equity values, which is in part due to the more conservative investment sector allocation in this market.
However, the more conservative asset allocation also dampens the impact of a recovery in equity values, which is reflected in the lower level of growth experienced in the 12 months to June 2010.
The projected values assume that the majority of funds flowing into retirement income stream products are directed into allocated pensions.
It is estimated that allocated pension products will grow by an average rate of 12.5 per cent per annum over the next 10 years to hold assets of $308.1 billion at 31 December 2019. Net cash flows are estimated to be $19.4 billion in the year to 31 December, 2019.
It should be noted that the Australian Bureau of Statistics population projections indicate a temporary slowing in the rate of growth in persons aged 65 between 2009 and 2011, a trend which is projected to reverse from 2012.
The high and low values use more aggressive and more conservative assumptions respectively than those used for the core projected values.
Short-term fund earning rates have been adjusted in the projections to allow for the expected impact of the recovery in equity values during 2009.
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