Self-managed super funds (SMSFs) are now paying out significantly more in retirement benefits than they receive in new contributions, underscoring a structural shift in how Australians are using the sector.
New analysis of Australian Tax Office data, contained in a report by financial planner James Hayes, shows SMSFs have moved decisively into retirement mode.
Data from the 2023–24 financial year showed SMSFs paid $57.7 billion in retirement benefits, compared with $26.2 billion in total member and employer contributions – more than twice going out than what is coming in. On a broader measure, total outflows reached $80.4 billion, exceeding inflows of $46.5 billion, making the sector a net payer overall during the financial year.
The demographic profile of members helps explain the change. More than half (50.8%) of SMSF members are aged 60 or over, while 38.2% are 65 or older and 16.7% are over 75. The data challenges long-held perceptions that SMSFs are primarily vehicles for high-earning professionals in their peak accumulation years.
“A lot of people still think SMSFs are mostly for people in their 40s building wealth,” Hayes said. “In reality, most SMSF members are already at, or well into, retirement.”
Hayes said the cashflow trends are clear.
“When SMSFs are paying out more than twice what they receive in contributions, it’s a clear sign they’ve entered the income phase. These funds are no longer about accumulation – they’re funding day-to-day life in retirement.”
Asset allocation patterns reflect this income focus. Nearly half of SMSF assets are held in listed Australian shares (28.1%) and cash or term deposits (16.2%). Compared with large industry or retail funds, Hayes said SMSFs typically have heavier exposure to domestic shares and property, and less exposure to bonds or international equities.
“What you tend to find in it is that they’re heavily weighted towards Australian shares, and property,” Hayes said, noting there is generally less exposure to the bond market or to international shares like US tech shares.
The prominence of cash and term deposits has become more significant in the context of rising interest rates. Hayes said rate increases can benefit SMSF members who are overexposed to cash, as yields improve after years of low returns. However, he cautioned that higher interest rates, such as the recent rise instigated by the Reserve Bank, can put short-term downward pressure on Australian shares and create ripples which flow through to property portfolios.
While many retirees in pension phase have paid down debt on property assets held within their funds, rate rises can still affect them indirectly if residential or commercial tenants experience financial stress, leading to rental arrears.
Hayes said liquidity is particularly important for retirees because SMSFs in pension phase are required to meet legislated minimum drawdown payments each year.
“Running an SMSF in retirement is very different to running one in your working years. Liquidity, simplicity and cash flow become just as important as investment returns,” he said.
He warned that funds with illiquid assets, such as property, could face pressure if they need to raise cash quickly to meet pension payments.
“If you overweight property, it’s very difficult to sell part of a house, you can’t sell a few bricks,” he said, noting that shares and managed funds are generally easier to liquidate to meet these legislated annual pension drawdowns.
Despite the impact of rate changes, Hayes said retirees should avoid reacting impulsively to economic headlines.
“I think the common mistakes for rate rises probably play into the common mistakes that people make in investing in general, which is to overreact to headlines,” he said.
“Stick to your overall strategy that you’ve developed either yourself or hopefully with your advisor and just stay the course.”
He added that while proposed changes to superannuation tax settings later this year warrant monitoring – particularly for higher-balance funds – superannuation remains a tax-effective structure for retirement savings.
“Look to control what you can control,” Hayes said, arguing that whether self-managed, retail or industry-based, superannuation remains “by far the best way to save for retirement.”
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