Australia’s pension assets pool is set to surpass other key economies, new research from the Super Members Council (SMC) has shown.
SMC analysis projects Australian pension assets, which currently rank fourth globally, will surpass the UK in 2030 and Canada by 2031, to rise to second in the world, with the US remaining the largest.
According to the industry body, between 2001 and 2023, Australia’s cumulative contribution inflows reached 180 per cent of GDP, the highest among Organisation for Economic Co-operation and Development (OECD) countries and well above the OECD average level.
Notably, Australia is also the only OECD country whose spending on its age pension system is expected to fall, dropping from 2.5 per cent of GDP to 2 per cent by 2026. Across OECD countries, average GDP spend on pensions is 9.3 per cent.
While the proportion of Australians receiving the full age pension is around 44 per cent today, this is projected to halve to 21 per cent in 2062–63.
Commenting on the findings, SMC CEO Misha Schubert described Australia’s super system as the “envy of the world”.
“Australia has the fastest growing super system globally – twice the rate of international peers,” Schubert said.
“We’re the only OECD country where spending on government-funded pension payments is falling and will continue to fall.
“Super is a great Australian success story. It gives millions of everyday Australians the chance to live the life they want in retirement, while saving the Budget money over the long-term. It’s a win-win.”
Notably, while Australia is the fourth-largest pool of pension assets, it has the 55th-highest population.
Moreover, funds under management in Australia are currently $4.1 trillion, exceeding any single sovereign wealth fund, including Norway ($2.8 trillion) and China ($2.1 trillion).
“Importantly, the system settings – automatic super payments, near universal coverage and preservation of savings have helped Australians set aside world leading retirement nest eggs,” Schubert said.
Australia’s system also claims the strongest net cash flow position globally, with around $3.14 billion in contributions invested each week.
Expounding on this, Schubert said that three key policy settings have made the country’s super system one of the most effective internationally.
“Because super is universal, compulsory, and preserved until our retirements, total system contributions are projected to reach $141 billion for the financial year 2024-25,” she said.
“These safeguards – especially that people’s investments are preserved until retirement – are the secret sauce of super, giving Australians in their millions the power of compound returns over decades.”
The SMC further said that the scale of Australia’s international investment pool has similarly strengthened, deepening the country’s economic and trade links with key global players.
Namely, a delegation of Australian super funds is currently in the US looking for new investment opportunities to further grow Australians’ super savings.
According to the industry body, these funds will be joining Australia’s ambassador to the US, Kevin Rudd AC, and Australia’s consul-general in New York, Heather Ridout, in Washington, DC and New York at the Superannuation Investment Summit this week.
Last week, Super Review reported that a confidential government-issued document has been circulating among super funds and industry bodies, outlining a set of voluntary best practice principles designed to ensure funds can keep pace with rising withdrawals.
The draft principles focus on deepening funds’ understanding of members’ needs, offering modern products and providing clearer information, with a key point of contention being the push for longevity protection in retirement income solutions.
Unable to comment on the document due to its confidential nature, the SMC pointed Super Review sister brand InvestorDaily to a statement released last year in which the council spoke out against the government mandating the use of annuities for members or specific cohorts.
The SMC said: “After a lifetime of building savings, people should be free to spend their money how they choose in retirement.
“The government should not mandate the use of annuities for members or cohorts of members. Trustees are best placed to create investment strategies for their members.”
