Several funds will merge to realise cost efficiencies and lower fee structures
Melbourne, Australia (PRWEB) October 13, 2012
Australia's superannuation system forms the backbone of the nation's envied pension system. Three pillars support Australia's pension system: a means-tested age pension, compulsory super contributions (i.e. the Superannuation Guarantee) and voluntary contribution schemes. The Superannuation Guarantee requires employers to contribute funds equal to 9.0% of their employees' incomes to the employees' choice of super fund. According to IBISWorld Industry analyst Ee Jen Lee, “this system has resulted in the Australian Superannuation Funds industry growing to become the fourth-largest private pension fund market in the world”. Although the financial crisis stripped much of the industry's investment income in 2007-08 and 2008-09, the industry is forecast to grow an annualised 22.4% over the five years through 2012-13. After two consecutive years of capital losses, investment income doubled to offset the losses made in the previous years, skewing growth upwards. However, the uncertainty stirred up by the eurozone debt crisis and US credit downgrading resulted in significant capital losses in 2011-12. With the global economy yet to heal, the industry's investment income will remain at the mercy of market reactions. Based on the forecast of a calmer year but weaker investment returns, IBISWorld estimates that the industry will earn $102.3 billion in investment income and members contributions in 2012-13.
While the value of superannuation savings will continue to rise, significant regulatory changes over the next five years will cause several major super funds (i.e. those with five or more members) to fall. “A number of funds will merge to realise cost efficiencies and lower fee structures”, says Lee. Meanwhile, the number of self-managed super funds will surge as more people decide to take control of their retirement savings. Consequently, industry employment and wages will decline. Starting in 2013-14, regulatory changes will cause the Superannuation Guarantee to increase gradually.
The Superannuation Funds industry in Australia is characterised by low market share concentration. The four largest superannuation funds are AustralianSuper, AMP, Commonwealth Bank, and National Australia Bank. Due to the large and increasing size of the industry, it becomes extremely difficult for a player to accumulate substantial market share. As such, the dynamics of the industry indicate that despite enterprise numbers falling (excluding small funds and self-managed super funds), industry concentration will remain low. Concentration remains low due to strong growth in the number of super funds available. Continued growth in the number of fund members is also affecting concentration levels due to increased demand for superannuation-related services and increasing numbers of DIY funds.
For more information, visit IBISWorld’s Superannuation Funds report in Australia industry page.
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IBISWorld industry Report Key Topics
The Superannuation Funds industry provides retirement benefits to members and includes both large and small funds. Industry revenue equals contributions plus net investment revenue. Investment revenue is income earned from investments plus capital gains or losses. Enterprises represent the major funds (i.e. super funds with five or more members), while establishments include all super funds.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Basis of Competition
Barriers to Entry
Technology & Systems
Regulation & Policy
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