Super funds must transfer rapid growth into sustainable retirement income

A BURGEONING superannuation system must still be able to retain the ability to engage with its members, a new report has found.

According to The Next 20 Years to 2045, the 12th edition of Deloitte’s Dynamics of the Australian Superannuation System report, the industry will triple within 20 years.

And it will be dominated by a handful of mega-funds as consolidation, technological change and an ageing population intensify the challenge of turning larger balances into sustainable retirement income.

Total net superannuation assets in Australia are expected to increase from around $4 trillion in 2025 to $12.4 trillion by 2045, equivalent to approximately $7.5 trillion in today’s dollars.

Deloitte Actuarial Consulting Partner Andrew Boal said: “Australia’s super system continues to grow strongly but the real test is whether the system can translate that growth into sustainable retirement income and improved outcomes for members.”

“As balances rise, there is an urgent need for more sophisticated, fit-for-purpose retirement products that can balance income, flexibility and longevity protection for a much larger and more diverse retiree population.

“Just as important will be how the funds engage with their members who are approaching or are in retirement, as it will not be easy for most members to navigate the complexity on their own to tailor their own portfolio of products and settings to meet their individual needs.”

The report shows the superannuation system has moved firmly into a mega-fund era, with consolidation continuing to reshape the market.

The report estimates the number of mega-funds with assets under management exceeding $100 billion will grow from 10 to 12 within a few years.

Meanwhile, corporate funds have largely disappeared, while the not-for-profit sector now controls more than half the system.

Retail funds (including platforms) and SMSFs each account for about a quarter.

“The industry has consolidated rapidly and the largest funds now dominate both assets and member flows,” said Diane Somerville, principal of superannuation at Deloitte/

“The top 25 superannuation entities now hold 97 per cent of APRA-regulated assets, with the top 10 controlling 73 per cent.

“We expect that there will be further rationalisation, with the few remaining corporate funds eventually moving into aligned public offer industry funds or retail master trusts.

“While some smaller funds will remain, we anticipate they will offer specialist investments or a targeted or niche member proposition to differentiate themselves.”

According to the report, industry funds are projected to strengthen their lead as the dominant segment as other fund types stagnate or decline.

Industry funds already account for around 46 per cent of total assets in 2025 and are projected to expand their share to 55 per cent by 2045.

This growth is being driven by strong default inflows, lower average fees and ongoing fund consolidation. By contrast, the retail and self managed super funds segments are expected to lose relative share over time.

“Retail funds are stabilising after a period of decline but growth is increasingly concentrated in adviser-led platforms rather than traditional master trusts.

“SMSFs, while still significant, are projected to gradually decline as a proportion of the system, reflecting an ageing member base and increasing drawdowns.

“Public sector funds are also expected to shrink slightly as a share of the market, while corporate funds continue to fade, effectively disappearing as standalone entities.”

With more than three million Australians aged 55 to 64 and approaching retirement, the retirement sector is set for further growth and retirement outcomes are becoming a bigger priority for funds.

Over the next 10 years, the proportion of members with less than $250,000 in super at the point of retirement is expected to halve and by 2045 around 70 per cent will have more than $500,000 (in today’s dollars) at retirement.

Boal said the implications were significant.

“The question is no longer whether the system can build balances but whether it can convert those balances into simple, effective and reliable retirement income,” he said.

“With significantly higher balances and more retirees coming through, funds need simple, tailored retirement solutions that align with retirees’ varied motivations, fears, and preferences.”