An analysis of the $1,945bn private retirement system in Australia and how policy and structural characteristics affect sustainability.

System overview

Australia’s funded pension system (referred to as “superannuation”) is based on a mandatory, occupational structure that performs well on international comparisons due to its professionalism and capacity to deliver good financial outcomes. There are three distinct types of superannuation fund:

  • not-for-profit funds and retail funds, regulated by the Australian Prudential Regulatory Authority (APRA); and
  • self-managed super funds (SMSFs) which are subject to oversight by the Australian Tax Office (ATO).

Assets held in the different pension vehicles are almost 150% of GDP:

  • APRA-regulated institutional funds manage almost AUS$2 trillion in assets,
  • SMSFs hold AUS$750 billion and there is over AUS$200 billion in other types of fund.

The superannuation industry has seen significant structural change in the past 10 years, driven to a large extent by policy and regulation. There has been considerable consolidation among institutional funds (those with more than four members) and a steady growth in assets. Not-for-profit super funds have captured market share from retail funds, while default options have been reinforced and continue to receive the lion’s share of new contributions.

Many high-balance members have opened SMSFs, although this trend appears to have slowed recently. While there are 186 APRA-regulated institutional super funds in total (down from 5,000 in 1995), the top 15 funds dominate, accounting for more than AUS$50 billion in assets and managing 62% of assets and 55% of member accounts. There are nearly 600,000 SMSFs catering to around one million individual accounts (Table 1).

Among service providers, there appears to be less concentration in both asset management and investment consultancy services than in other countries. One reason is that some of the larger super funds are bringing investment capabilities in-house, which is reducing their reliance on investment consultants and external asset managers.

Responsible investment

APRA has applied sustained pressure on super funds to improve their operational and investment efficiency and to make choices simpler for members, but has only recently started to address environmental, social, and governance (ESG) issues. Still, policy and regulation have not stood in the way of responsible investment. Indeed, the superannuation industry has taken meaningful steps towards developing such strategies, especially when compared with pension providers in other countries. This progress was initiated by the not-for-profit segment. However, for-profit super funds are following their lead, such that 81% of funds now have some form of responsible investment commitment in place.

Table 1: Australia market structure

 Superannuation fundsSelf-managed super funds
 Industry Public sectorRetailCorporateExempt public sector
Total assets (AUD billion)1 718.6 520.1 625.9 59.7 148.4 747.6
PRI signatories as % total assets 88% 75% 45% 39% 0% n/a (no institutional ownership)
Number of entities 37 18 112 19 19  
Sector concentration 10 biggest industry funds = 82% of sector assets, 3 biggest funds = 46%  10 biggest public sector funds = 96% of sector assets, 3 biggest funds = 58% 10 biggest retail funds = 73% of sector assets, 3 biggest = 37% 3 biggest corporate funds = 76% of sector assets n/a 598,572 entities for 1,125,000 member accounts
Service provider concentration Consultant and asset management markets competitive; increasing capabilities of large super funds is incrementally reducing role of external providers in some areas    
Regulator APRA APRA APRA APRA State or Commonwealth governments ATO
Governance structures RSE Licensees (Trustee) Trustee Member (Trustee)
Asset allocation Listed equity 47% Unlisted equity 5% Bonds 19% Property 10% Infrastructure 9% Cash 8% Other 2% Listed equity 39% Unlisted equity 6% Bonds 26% Property 9% Infrastructure 5% Cash 9% Other 5% Listed equity 53% Unlisted equity 2% Bonds 21% Property 7% Infrastructure 2% Cash 12% Other 4% Listed equity 43% Unlisted equity 2% Bonds 29% Property 9% Infrastructure 4% Cash 9% Other 5%


  Listed equity 36% Bonds 6% Property 21% Infrastructure 1% Cash 24% Other 12
Key barriers to system sustainability APRA focus on costs and simplicity. Performance measures (e.g. MySuper heat map) do not incorporate ESG risks or opportunities. Prudential standards in general not prescriptive, but not supportive   Member objectives/ Advisor/ provider