Superannuation in Australia has grown significantly, with the country now holding the fifth-largest pool of retirement savings globally. As of December 2024, the total investment in super reached $4.2 trillion, marking an 11.5% increase in just a year. This growth is attributed to rising compulsory employer contributions and a surge in wages. The two largest super funds, AustralianSuper and Australian Retirement Trust, each manage over $300 billion in assets.
The upward trajectory of superannuation is set to continue as the Superannuation Guarantee rate is scheduled to rise to 12% by July 2025. This growth has also led to the consolidation of super funds, with the number of regulated funds decreasing as the industry consolidates. The push for mergers has been fueled by the scrutiny on underperforming funds following inquiries like the Productivity Commission and the banking Royal Commission.
One of the outcomes of these investigations has been a shift of members and funds from retail to industry super funds. The trend towards industry funds is reflected in the ranking of the 20 largest super funds in Australia, where industry funds dominate the top positions. Economies of scale have been observed in larger funds, leading to potentially lower costs for members. However, the correlation between fund size and performance is not straightforward.
While larger funds may benefit from economies of scale, the link between size and performance is nuanced. Not-for-profit funds tend to see improved net returns with size, potentially due to different investment strategies. The data suggests that larger funds make better investment decisions within asset classes, but the direct pass-through of scale benefits to members in the form of lower fees is less clear.
It is crucial for individuals to be aware of the leading super funds in terms of membership and assets to benchmark their own fund choices. AustralianSuper maintains its position as the largest fund in terms of both assets and members, followed closely by Australian Retirement Trust. Industry funds like REST and Hostplus also feature prominently in the top rankings, with significant membership numbers.
Changes in the ranking of super funds are often influenced by mergers and new business ventures. For instance, CareSuper and IOOF have seen substantial increases in members following mergers, while some retail funds have experienced declines. These shifts underscore the dynamic nature of the superannuation landscape and the importance of staying informed about fund performance.
Understanding the dynamics of super fund size, performance, and member growth can empower individuals to make informed decisions about their retirement savings. As the superannuation sector continues to evolve, being cognizant of industry trends and the performance of leading funds can help individuals navigate the complex world of superannuation effectively.
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