Australia’s superannuation industry has entered a new mega-fund era, with Deloitte forecasting consolidation will continue to funnel assets into a shrinking group of dominant funds as the retirement system grows to $12.4 trillion by 2045.
The latest Dynamics of the Australian Superannuation System report found the number of funds managing more than $100 billion is expected to increase from 10 to 12 within the next few years, while the biggest players continue to tighten their grip on member assets.
Today, the top 10 superannuation entities control 73 per cent of APRA-regulated assets, with the top 25 accounting for 97 per cent, highlighting the rapid pace of industry consolidation.
Principal, superannuation, Diane Somerville, said the industry has “consolidated rapidly, and the largest funds now dominate both assets and member flows”.
“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.”
Deloitte projected Australia’s total super assets will more than triple from around $4 trillion in 2025 to $12.4 trillion by 2045.
Rather than being spread evenly across the sector, however, much of that growth is expected to accrue to the largest industry funds as mergers continue and default inflows reinforce their scale advantages.
Industry funds currently hold around 46 per cent of system assets and are forecast to expand that share to 55 per cent by 2045, while retail funds and self-managed super funds gradually lose market share.
The report also suggested scale is becoming increasingly important for funds seeking to invest in technology, retirement products and member services, while smaller funds will need to differentiate themselves to remain competitive.
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.”
Deloitte argued the industry’s next phase will be defined less by mergers and more by whether mega-funds can convert their growing scale into better retirement outcomes.
More than three million Australians are approaching retirement, and by 2045 around 70 per cent of retirees are expected to hold more than $500,000 in superannuation, in today’s dollars.
“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,” Boal 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.”
The growing concentration of assets is also expected to reshape investment markets.
Super funds already own just over 36 per cent of the ASX’s market capitalisation, and Deloitte estimated that figure could approach 50 per cent over time if current allocation settings remain broadly unchanged.
Somerville warned the trend would increase the importance of diversification as Australia’s listed market remained heavily concentrated in financials and resources.
