The federal government's planned changes to superannuation tax concessions could weigh heavily on the self-managed super funds (SMSF) industry.
The budget measures - aimed at limiting the tax-free status of retirement accounts over $1.6 million and transition-to-retirement arrangements.- will result in SMSFs paying an additional $600-700 million every year to the taxman.
They will also slow growth for the sector and force SMSFs to take on more risk, according to investment bank Credit Suisse.
"The proposals are set to weigh on SMSFs the most and will be yet another reason why the huge pool of money managed by selfies will grow at a considerably slower rate in the future," the Credit Suisse analysts said in a note.
The report forecasts that growth in SMSF assets will slow down to two per cent annually until 2020, compared to the 15 per cent average growth over the last 12 years.
SMSFs control assets worth $590 billion and account for about a third of the retirement savings pool in Australia. Credit Suisse says this wealth is mainly concentrated in Australian equities, local property and cash.
The government's changes, by themselves, will result in a decline in flows into SMSFs, the report said.
"We are not certain how big the drop off will be, but we estimate it to be in the magnitude of $1.5 billion per year on an ongoing basis," the analysts wrote.
SMSFs will also seek to counter slowing growth by allocating a higher share of funds for equities, which could, in turn, boost demand for high dividend yielding stocks.
The report named stocks such Adelaide Brighton, AGL Energy, Asaleo Care and Boral among its picks for SMSF portfolios.
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