Lump sum mentality still a factor

Australia's superannuation lump sum mentality may be changing but it is still a significant factor, according to the latest superannuation data released by the Australian Prudential Regulation Authority (APRA).

The data revealed that while an increasing number of retirees are opting to take pensions, lump sums still represent slightly more than half of the benefit payments being taken by Australians.

In the September quarter, lump sum benefit payments ($8.3 billion) were 49.1 per cent and pension benefit payments ($8.6 billion) were 50.9 per cent of total benefit payments, while for the 12 months ending September 2016, lump sum benefit payments ($33.0 billion) were 50.2 per cent and pension payments ($32.7 billion) were 49.8 per cent of total benefit payments.

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Industry commentators have urged caution on interpreting the lump sum data on the basis that many retirees do not have sufficient funds at retirement to make the taking of a pension a viable option.

The APRA data also revealed that the key differentiator between industry and retail superannuation funds was infrastructure investment.

The data revealed industry funds had the largest exposures to infrastructure at around seven per cent, compared to barely two per cent for retail funds.




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So pension payments we roughly equal to lump sum payments but pension payments are typically 5-10% of pension super benefits? If a client had a low balance I'm not surprised they took a lump sum. Based on these estimates a lump sum form of super withdrawal represents 7% or so of total super benefits taken over the life of a superannuation interest. This is quite a different headline!

And legislative changes now are making lump sums more attractive. Why leave your funds in an income stream subject to legislative whims, and less and less benefits, when you can take it out and use it with little or no disadvantage anymore? The changes coming prevent money going in, and change all the rules about it when it is in there.

Melinda to a point however if you are wealthy it still remains the tax structure of choice if your marginal rate is higher than 15%.

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