Article Summary
The superannuation industry in Australia is experiencing a shift towards consolidation, with a rise in mega funds and increasing expectations for strengthening administration and service arrangements. Cost management is crucial for sustainability in the face of these challenges. The sector’s assets grew to $4.2 trillion by the end of December 2023-24, with industry funds’ share expanding by 10 percentage points in the past five years. Notably, the number of mega funds has increased to eight, and cost management remains essential for the funds’ long-term success.
What This Means for You
- Stay informed about the consolidation of superannuation funds, as this may impact your investment choices and future returns.
- Understand the benefits of mega funds, such as increased efficiency and negotiating power, while being aware of potential downsides like reduced competition.
- Consider the importance of cost management in maintaining sustainability for your chosen superannuation fund, as this affects the overall performance and potential benefits you receive.
- Be prepared for expected growth in the number of mega funds, particularly if your current fund decides to merge or join this category.
Original Post
“The challenge to meet stakeholder expectations is increasing. On the one hand, the industry continues to pursue a consolidation agenda with the promise to deliver scale efficiencies, and on the other, we are witnessing increasing expectations on strengthening administration and service arrangements,” Elkins said.
“Cost management will be key to managing sustainability challenges that are being faced throughout the industry. Considering how costs are managed ongoing is becoming increasingly important for super funds.”
Australia’s super assets grew from $3.5 trillion to $3.9 trillion in the year to June, and figures from APRA show the sector’s assets hit $4.2 trillion at the end of December.
The report showed not-for-profit industry funds expanded their share of the super pool in 2023-24, from 38.2 to 40 per cent, while industry funds’ share has swelled by about 10 percentage points in the past five years.
Another key trend in super has been the rise of “mega funds” (funds sized over $100 billion) – partly due to a spate of mergers.
Key Terms
- Superannuation
- Consolidation agenda
- Mega funds
- Asset growth
- Cost management
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