THE uncertain economy has taken its toll on Australia's self-managed super funds, with confidence levels plummeting, investment returns down and a growing tendency to hoard cash rather than risk the vagaries of the sharemarket.
The latest Intimate with Self-Managed Superannuation report by Russell Investments and the SMSF Professionals' Association of Australia found that while figures from the Australian Taxation Office show self-managed funds performed better than public funds between 2007 and 2009, the proportion of trustees who feel confident they will achieve their retirement income targets has halved, from 34 per cent surveyed in 2010 to 17 per cent last year.
The international investment climate has put managing risk at the top of the priority list for trustees, overtaking costs and returns. The proportion of trustees who now regard shares as too volatile has doubled to one-third this year and self-managed funds are building a growing "wall of cash" as part of their risk reduction.
"SMSFs have long held strong cash holdings, mainly due to the fact many hold investments outside of super and for income payment requirements," said the managing director for retail at Russell Investments, Patricia Curtin.
"But there has been an interesting debate as to whether they have been holding or hoarding cash. What we're seeing now is more hoarding through disillusionment with the cult of equities, which has more than doubled year on year. It's not surprising trustees are going back to cash."
Ms Curtin said the survey found continuing uncertainty over government changes to super was also worrying trustees. Just under a quarter of those surveyed said they were "very confident" in the super system, though opinions were split on whether the tax benefits outweighed the potential risks.
The survey found some legislative changes were already affecting trustees' willingness or ability to save. About 40 per cent said they would have contributed more to super if the caps on contributions had been higher, with average additional savings of almost $65,000.